IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division

RELIGIOUS TECHNOLOGY CENTER,

Plaintiff,

v. Civil Action No. 95-1107-A

ARNALDO PAGLIARINI LERMA, et al.,

Defendants.

MEMORANDUM IN SUPPORT OF DEFENDANT ARNALDO P. LERMA'S
MOTION FOR SUMMARY JUDGMENT AND/OR TO DISMISS

ROSS, DIXON & MASBACK, L.L.P.
Lee Levine
Jay Ward Brown (Va. Bar no. 34355)
601 Pennsylvania Avenue, N.W.
North Building Washington, D.C.
20004-2688 (202) 662-2000

FAEGRE & BENSON, P.L.L.P.
Thomas B. Kelley
Natalie Hanlon-Leh
2500 Republic Plaza
370 17th Street
Denver, Colorado 80202
(303) 592-9000

Duane W. Krohnke
Kenneth A. Liebman
2200 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
(612) 336-3000

ATTORNEYS FOR DEFENDANT ARNALDO PAGLIARINI LERMA

Dated: January 5, 1996

TABLE OF CONTENTS

Page

INTRODUCTION 1

STATEMENT OF FACTS 2

I. THE RTC'S POLICY AND PRACTICE OF USING LITIGATION AS A TOOL TO HARASS AND, AVOWEDLY, EVEN TO "RUIN" ITS OPPONENTS 4

II. THE RTC'S MISUSE OF THIS COURT'S WRIT OF SEIZURE AND ORDER OF IMPOUNDMENT AS A TOOL TO HARASS MR. LERMA AND TO INVESTIGATE THIRD-PARTY CRITICS 9

A. The Record Prior To September 15 9

B. The Court's September 15 Order and November 29 Opinion 18

C. The Record Revealed By Discovery Since September 15 19

D. Security 26

III. RTC'S OTHER ABUSIVE CONDUCT IN THE COURSE OF THIS CASE AND IN THE PARALLEL PROCEEDING IN COLORADO 29

ARGUMENT

I. MR. LERMA IS ENTITLED TO SUMMARY JUDGMENT ON THE RTC'S INFRINGEMENT CLAIMS BECAUSE, AS A MATTER OF LAW, THE RTC HAS MISUSED ITS COPYRIGHTS 36

A. RTC Used The Writ Of Seizure And Order Of Impoundment It Obtained From This Court Pursuant To The Copyright Act As A License To Investigate And Intimidate Its Critics And This Misuse Of Its Copyrights Bars The Present Infringement Action 40

B. RTC'S Abuse Of The Litigation Process, A Process To Which It Gained Access On The Basis Of Its Purported Copyrights, Constitutes Misuse Of Its Copyrights 47

II. THE FULLY DEVELOPED RECORD DEMONSTRATES THAT THE RTC HAS COMMITTED A FRAUD ON THE COURT AND, ACCORDINGLY, ITS COPYRIGHT INFRINGEMENT CLAIMS SHOULD BE DISMISSED 50

[i]

III. THE FIRST AND FOURTH AMENDMENT RIGHTS THAT RTC'S CONDUCT IMPLICATES CAN ONLY BE VINDICATED BY REFUSING TO ENTERTAIN RTC'S CLAIMS 55

1. First Amendment Concerns 56

2. Fourth Amendment Concerns 61

CONCLUSION 64

[ii]

TABLE OF AUTHORITIES

Cases Page

Allard v. Church of Scientology, 129 Cal. Rptr. 797 (Ct. App. 1976), cert. denied, 429 U.S. 1091 (1977) 5

Ayeni v. Mottola, 35 F.3d 680 (2d Dir, 1994), cert. denied, 115 S. Ct. 1689 (1995) 63, 64

Branzburg v. Hayes, 408 U.S. 665 (1972) 56, 64

Church of Scientology Int'l v. Time Warner Inc., 903 F. Supp. 637 (S.D.N.Y. 1995) 58

Church of Scientology v. Armstrong, No. C 420153 (Cal. Super. Ct. Los Angeles County June 20, 1984) 7

Cox Broadcasting Corp. v. Cohn, 420 U.S. 469 (1975) 58

Electronic Data Systems Corp. V. Computer Assocs. Int'l. Inc., 802 F. Supp. 1463 (n.D. Tex. 1992) 38

F.E.L. Publications, Ltd. v. Catholic Bishop of Chicago, No. 81-1333, 1982 WL 19198 (7th Cir. Mar. 25, 1982), cert. denied, 459 U.S. 859 (1982) 38

First Technology Safety Sys., Inc. v. Depient, 11 F.3d 641 (6th Cir. 1993) 41

Founding Church of Scientology v. Webster, 802 F.2d 1448 (D.C. Cir, 1986), cert. denied, 484 U.S. 871 (1987) 7 Great Coastal Express, Inc. v. International Brotherhood of Teamsters, 675 F.2d 1349 (4th Cir. 1982), cert. denied, 459 U.S. 1128 (1983) 50,51

Grosiean v. American Press Co., 297 U.S. 233 (1936) 57

Harper & Row Publishers v. Nation Enters., 471 U.S. 539 (1985) 60

Herbert V. Lando, 441 U.S. 153 (1979) 57, 64

In view of the considerable number of cases that Mr. Lerma has cited for purposes of illustration, he has included in this Table of Authorities only those cases on which he principally relies for substantive points.

[iii]

Hustler Magazine v. Falwell, 485 U.S. 46 (1988) 59

In re Sealed Case, 754 F.2d 395 (D.C. Cir. 1985) 53, 54

Lasercomb America, Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990) 36-40

Mapp v. Ohio, 367 U.S. 643 (1961) 62

Marcus v. Search Warrants of Property, 367 U.S. 717 (1961) 62

Mas v. Coca-Cola Co., 163 F.2d 505 (4th Cir. 1947) 54

National Cable Telvision Ass'n v. Broadcast Music, Inc., 772 F. Supp. 614 (D.D.C. 1991) 38, 51

National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639 (1976) 55

New York Times Co. v. Sullivan, 376 U.S. 254 (1964) 59, 61

Paramount Pictures Corp. v. Doe 1, 821 F. Supp. 82 (E.D.N.Y. 1993) 61

PRC Realty Sys., Inc. v. National Ass'n of Realtors, 972 F.2d 341, 1992 WL 183682 (4th Cir. 1992) 38

Qad, Inc. v. ALN assocs., Inc., 770 F. Supp. 1261 (N.D. Ill. 1991), appeal dism'd in relevant part, 974 F.2d 834 (7th Cir. 1992) 38, 39, 43-47, 49, 60

Religious Technology Center v. Scott, 869 F.2d 1306 (9th Cir. 1989) 8

Religious Technology Center v. Wollersheim, 971 F.2d 364 (9th Cir. 1992) 7

Reuber v. Food Chemical News, Inc., 975 F.2d 703 (4th Cir.) (en banc), cert. denied, 501 U.S. 1212 (1991) 48

Rosemont Enters. v. Random House, Inc., 366 F.2d 303 (2d Cir. 1966), cert. denied, 385 U.S. 1009 (1967) 60

Soldal v. Cook County, 113 S. Ct. 538 (1992) 61

Stanford v. Texas, 379 U.S. 476 (1965) 62

[iv]

Synanon Church v. United States, 579 F. Supp. 967 (D.D.C. 1984), aff'd, 820 F.2d 421 (D.C. Cir. 1987) 54

Synanon Found., Inc. v. Bernstein, 503 A.2d 1254 (D.C. 1986) 54, 55

Time Warner Entertainment Co. v. Does Nos. 1-2, 876 F. Supp. 407 (E.D.N.Y. 1994) 41, 61

Time, Inc. v. Hill, 385 U.S. 374 (1967) 48

United States v. Sanusi, 813 F. Supp. 149 (E.D.N.Y. 1992) 63

United States v. Shaffer Equip. Co., 11 F.3d 450 (4th Cir. 1993) 51, 52, 55

Warner Bros., Inc. v. Dae Rim Trading, Inc., 677 F. Supp. 740 (S.D.N.Y. 1988), aff'd in relevant part, 877 F.2d 1120 (2d Cir. 1989) 40, 53, 61, 63

Washington Post Co. v. Keogh, 365 F.2d 965 (D.C. Cir. 1966), cert. denied, 385 U.S. 1011 (1967) 48, 58

White v. Federal Express Corp., 729 F. Supp. 1536 (E.D. Va. 1990), aff'd, 939 F.2d 157 (4th Cir. 1991) 39

Wollersheim v. Church of Scientology, 6 Cal. Rptr. 2d 532 (Ct. App. 1992), cert. denied, 114 S. Ct. 1216 (1994) 5

Zurcher v. Stanford Daily, 436 U.S. 547 (1978) 49, 57

Statutes

17 U.S.C. * 503 41

Other Authorities

7 James Wm. Moore, Moore's Federal Practice, * 60.33 (2d Ed. 1995) 50

[v]

INTRODUCTION

Notwithstanding the insistence of plaintiff Religious Technology Center (the "RTC" or the "Church") that it brought this lawsuit against defendant Arnaldo P. Lerma ("Mr. Lerma") for the secular purpose of enforcing its copyrights, this Court already has recognized that

the primary motivation of RTC in suing Lerma, DGS and The Post is to stifle criticism of Scientology in general and to harass its critics. As the increasingly vitriolic rhetoric of its briefs and oral argument now demonstrate, the RTC appears far more concerned about criticism of Scientology than vindication of its secrets.

Memorandum Opinion in Support of Order of September 15, 1995 and Amended Order of November 29, 1995 ("November 29 Opinion") at 13 (Dkt. 234). In response to this well-supported finding, the RTC now insists that neither Mr. Lerma nor the Court is entitled to question its purpose or tactics:

[E]ven were RTC''s motives other than purely driven by its intellectual property entitlements -- and RTC hastens to assure this Court that in fact they are precisely so driven -- RTC's motives are legally irrelevant and indeed are foreclosed from inquiry precisely because of the unassailably objective basis of RTC's claims[.]

Plaintiff's Motion for Summary Judgment For Copyright Infringement Against Defendant Lerma ("RTC's Motion for Summary Judgment") at 3 n.4 (Dkt. 261). In other words, the RTC asserts both an unfettered right to employ the Copyright Act for ulterior and inimical purposes, and the freedom to use the process and writs of this Court to violate the civil rights of its critics. Moreover, the RTC claims that

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neither this Court nor any other may hold it accountable for doing so, so long as it can stitch together an "objectively" colorable copyright infringement claim. In fact, however, neither this Court nor the federal judiciary of which it is a part is powerless to prevent the abuse of Mr. Lerma's rights that has taken place here. Indeed, based only on the record as it stood as of September 15, 1995, this Court already has concluded that, as a result of its "improper search" of Mr. Lerma's computer files, the RTC has a "problem of unclean hands" that "mandates denial of the equitable relief" it seeks against Mr. Lerma. See November 29 Opinion at 16-17. That record, we now know, is not even the half of it. Subsequent discovery has demonstrated that:

* Broad as it was, the "string" search that the RTC had described to the Court and through which it purportedly "limited" its examination to every document containing words like "Hubbard" or "thetan" was not even the predominant method the RTC used to select those of Mr. Lerma's computer files it wanted to review;

* If Scientologists located 500 files by conducting string searches, they located and scrolled through 800 files identified solely by reviewing file names that piqued their curiosity;

* The RTC not only selected these 800 files for review without the use of any search terms, it set out to locate these files after it had already identified every file that contained the search terms it had chosen -- in other words, the RTC focused its review on files that it was certain did not contain words like "Hubbard" or "thetan";

* The RTC made and retained (and still holds) copies of 139 of Mr. Lerma's computer files, 121 of which contain nothing that the RTC maintains infringes any copyright, and eight others which contain material that allegedly infringes copyrights held by someone other than RTC;

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* Information from Mr. Lerma's files has found its way into Scientology-related publications attacking Mr. Lerma; and

* Contrary to its subsequent representations to the Court, the RTC''s review irrevocably altered Mr. Lerma's C-drive -- adding files that were not there when the RTC seized it and destroying at least one file that was there before Mr. Lerma's home was raided.

Much of this new evidence comes from sworn testimony of James Settle given after the Court's September 15 ruling (memorialized in the November 29 Opinion) -- deposition testimony that is, at the very least, ad odds with representations previously made to this Court by the RTC. This and other evidence, much of which was not available to Mr. Lerma or to the Court when it rendered its September 15 ruling, establishes both that the RTC has misused its copyrights and that it has, in fact, committed a fraud on this Court. Accordingly, for the reasons set forth below, Mr. Lerma requests that (1) the Court enter summary judgment in his favor on RTC's copyright infringement claims on the basis of his affirmative defense of misuse of copyright, or, (2) in the alternative, that the Court dismiss the RTC's copyright claims as a sanction for its improper litigation conduct.*

* Mr. Lerma also is entitled to prevail on the merits of the RTC's remaining claim. The reasons why the RTC;s infringement claims are insupportable will be addressed in Mr. Lerma's opposition to the RTC;s Motion for Summary Judgment, to be filed separately on January 12, 1996.

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STATEMENTS OF FACTS

I. THE RTC'S POLICY AND PRACTICE OF USING LITIGATION AS A TOOL TO HARASS AND, AVOWEDLY, EVEN TO "RUIN" ITS OPPONENTS

L, Ron Hubbard, the founder of Scientology and the purported author of the materials at issue in this case, stated plainly the policy that informs RTC's use of the courts to punish its perceived critics and enemies. Reflecting on the "purpose" of litigation, Mr. Hubbard wrote:

[It] is to harass and discourage rather than to win. The law can be used very easily to harass and enough harassment on somebody who is simply on the this edge anyway, well knowing that his is not authorized, will generally be sufficient to cause his professional decease. If possible, of course, ruin him utterly.*

The Church of Scientology's litigation juggernaut leaves no doubt that Mr. Hubbard's organizations have followed his directive.* A search of the Lexis or Westlaw databases reveals hundreds of cases to which the Church was or is a party. Its abusive conduct has resulted in several substantial verdicts

* See L. Ron Hubbard, "Magazine Articles on Level O Checksheet," First Lerma Decl. Attach. B (Fishman Declaration) at Bates No. 58; see also Sept. 6, 1995 Deposition of Warren McShane (confidential portion) (copy attached as EX. 12 to Opposition of Defendant Arnaldo P. Lerma to Plaintiff's Motion for a Preliminary Injunction (Dkt. 220)) at 9-10 (confirming that article was written by L. Ron Hubbard); Memorandum Opinion dated November 28, 1995 ("November 28 Opinion") at 11 (quoting Hubbard) (Dkt. 220).

* It is not only appropriate, but necessary to view the individual corporate entities that make up Scientology as components of a "wider structure," because its nominal corporate structure "is something of a deceptis visus." Church of Spiritual Technology v. United States, 26 Cl. Ct. 713, 718 (Cl. Ct. 1992), aff'd, 991 F.2d 812 (Fed. Cir.), cer. denied, 114 S. Ct. 197 (1993).

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against it. See, e.g., Wollersheim v. Church of Scientology, 6 Cal. Rptr. 2d 532 (Ct. App. 1992) (describing prior history of case in which ex-minister successfully sued Church for damages arising from coercion and psychological manipulation), cert. denied, 114 S. Ct. 1216 (1994); Allard v. Church of Scientology, 129 Cal. Rptr. 797 (Ct. App. 1976) (court affirmed jury verdict of $150,000 in compensatory damages in favor of a former member who brought charges of malicious prosecution after the Church had him arrested on false charges of robbery), cert. denied, 429 U.S. 1091 (1977). This plaintiff and its affiliated entities regularly invoke the law of defamation* and, more recently, the law of copyright* to embroil their critics in costly and time consuming

* See, e.g., Church of Scientology Int'l v. Time Warner, Inc., 903 F. Supp. 637 (S.D.N.Y. 1995); Church of Scientology Int'l v. Daniels, 992 F.2d 1329 (4th Cir.), cert. denied, 114 S. Ct. 195 (1993); Church of Scientology v. Flynn, 744 F.2d 694 (9th Cir. 1984); Church of Scientology v. Cazares, 638 F.2d 1272 (5th Cir. 1981); Church of Scientology v. Foley, 640 F.2d 1335 (D.C. Cir.) (en banc), cert. denied, 452 U.S. 961 (1981); Founding Church of Scientology v. Verlag, 536 F.2d 429 (D.C. Cir. 1976); Church of Scientology Int'l v. Eli Lilly & Co., 778 F. Supp. 661 (S.D.N.Y. 1991); Church of Scientology v. Siegelman, 475 F. Supp. 950 (S.D.N.Y. 1979); Church of Scientology v. Green, 354 F. Supp. 800 (S.D.N.Y. 1973); Church of Scientology v. Dell Publishing Co., 362 F. Supp. 767 (N.D. Cal. 1973); Church of Scientology v. Fishman, No. CV 91-6426 HLH (Tx) (C.D. Cal.); Church of Scientology v. Minnesota State Medical Ass'n Foundation, 264 N.W.2d 152 (Minn. 1978); Missouri Church of Scientology v. Adams, 543 S.W.2d 776 (Mo. 1976); Founding Church of Scientology v. American Medical Ass'n, 377 N.E.2d 158 (Ill. App. Ct. 1978).

* See, e.g., New Era Publications Int'l v. Carol Publishing Group, 904 F.2d 152 (2d Cir.), cert. denied, 498 U.S. 921 (1990); New Era Publications Int'l v. Henry Holt & Co., 873 F.2d 576 (2d Cir. 1989), cert. denied, 493 U.S. 1094 (1990); Religious (continued....)

5

litigation. Courts confronted with the Church's claims have criticized and even sanctioned it for its frivolous and abusive tactics. For example, in Religious Technology Center v. Scott, No. 85-711-JMI (C.D. Cal. Jan. 20, 1993) (copy attached to Sixth Hirsh Decl. as Ex. B), RTC brought an action for copyright infringement and violation of the Lanham Act, which was dismissed for its discovery misconduct.* The Special Master appointed to consider the defendants' application for attorney's fees under the Copyright and Lanham Acts found that RTC

abused the federal court system by using it, inter alia, to destroy their opponents, rather than to resolve an actual dispute over trademark law or any other legal matter.

Id. at 2. The Special Master also found that, although RTC's complaint was not frivolous, it was filed in an attempt to harass the individual defendants and destroy the church defendants through massive over-litigation and other highly questionable litigation tactics. The Special Master has never seen a more glaring example of bad faith litigation than this.

(...continued) * Technology Center v. Netcom Online Communications Servs., Case No. C95-20091 RMW (N.D. Cal.); Religious Technology Center v. F.A.C.T.Net, Inc., No. 950K-2143 (D. Colo.); Bridge Publications, Inc. v. Vien, 827 F. Supp. 629 (S.D. Cal. 1993).

* Specifically, RTC "undert[took] a massive campaign of filing every conceivable motion (and some inconceivable) to disguise the true issue in these pretrial proceedings. Apparently viewing litigation as war, plaintiffs by this tactic have had the effect of massively increasing the costs to the other parties, and for a while, to the Court." Declaration of Hon. James M. Ideman (copy attached to Sixth Hirsh Decl. as Ex. C) * 4. The RTC's failure to comply with discovery orders "consisted of evasions, misrepresentations, broken promises and lies, but ultimately with refusal." Id.

6

Id. at 4. Accordingly, the Special Master granted the defendants' request for attorney's fees in the amount of $2.9 million. Id. at 2, 4.* See also, e.g., Founding Church of Scientology v. Webster, 802 F.2d 1448, 1450 (D.C. Cir. 1986) (discussing Church officials' conspiracy to obstruct justice), cert. denied, 484 U.S. 871 (1987); Church of Scientology v. Armstrong, No. C 420153, slip op. at 8 (Cal. Super. Ct. Los Angeles County June 20, 1984) (copy attached to Sixth Hirsh Decl. as Ex. D) ("the Church or its minions is fully capable of intimidation or other physical or psychological abuse if it suits their ends," and "[I]n addition to violating and abusing its own members civil rights, the organization over the years ... has harassed and abused those persons not in the Church whom it perceives as enemies"), aff'd, 283 Cal. Rptr. 917 (Cal. App. 1991). Of late, the Church has been especially vigorous in its pursuit of litigation under the copyright laws to punish critics who dare to possess what the Church characterizes as its "sacred scriptures." See, e.g., Religious Technology Center v. Wollersheim, 971 F.2d 364 (9th Cir. 1992) (after Church sued Wollersheim, his attorney, his expert witnesses and another ex- Scientologist alleging RICO violations, copyright infringement, and misappropriation of trade secrets, court dismissed RICO claim

* The RTC;s conduct in Scott led the federal judge hearing the case to recuse himself, in part because the RTC began "to harass [his] former law clerk who assisted [him] on this case, even though she now lives in another city and has other legal employment." Ideman Decl. (Sixth Hirsh Decl. at Ex. C) * 1.

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and held that use of material by experts and attorneys was fair use under copyright law); Religious Technology Center v. Scott, 869 F.2d 1306 (9th Cir. 1989).* Indeed, the RTC's own publication affirmatively brags about its ability to use the courts to "make[] squirrels cease suppressive acts against Scientology" and includes vivid accusations about the character and conduct of Church critics. See Sixth Hirsh Decl. Ex. E (issue of RTC newspaper) at 4-5. As the RTC itself put it when describing one raid on a critic, "RTC's raid and seizure was the worst wake-up call this SP has ever had[.]" Id. at 5.* It is hardly surprising, therefore, that this Court, confronted with the RTC's vitriol and lack of good faith, see Memorandum Opinion of November 28, 1995 ("November 28 Opinion") at 11 and November 29 Opinion at 13, was compelled to find that, in this very case, "the primary motivation of RTC in suing Lerma, DGS and The Post is to stifle criticism of Scientology in general and to harass its critics," November 29 Opinion at 13.* And, as

* In addition to suing Mr. Lerma, Digital Gateway Systems, Inc., the Washington Post and two of its reporters in this action, of course, RTC also has sued Lawrence Wollersheim, Robert Penny and FACTNet, Inc. in a closely-related Colorado action, Religious Technology Center v. FACTNet, Inc., et al., No. 95-K-2143 (D. Colo.), as well as various parties in Religious Technology Center v. Netcom Online Communications Services, Inc., et al., No. C95-20091 RMW (N.D. Cal.).

* "SP" is an abbreviation for "suppressive Person" which, in Church jargon, means "a person who's ...Committed antisocial acts against mankind, nonsocial, harmful acts,: First Hirsh Decl. Ex. B1 at 284 (Dkt. 45), i.e., a critic of Scientology.

* See also November 28 Opinion at 11 ("the motivation of plaintiff in filing this lawsuit against The Post is

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the now-completed record of discovery in this action reveals, the RTC;s motives and conduct are more "reprehensible" than even Mr. Lerma or this Court was aware at the time of the Court's September 15 ruling. See November 28 Opinion at 11. That record demonstrates that, through its institution and prosecution of this action, the RTC has followed Mr. Hubbard's instructions regarding the "purpose" of litigation to the letter, a course of action it will pursue so long as it can convince this Court that the Copyright Act entitles it to do so.

II. THE RTC'S MISUSE OF THIS COURT'S WRIT OF SEIZURE AND ORDER OF IMPOUNDMENT AS A TOOL TO HARASS MR. LERMA AND TO INVESTIGATE THIRD-PARTY CRITICS

A. The Record Prior To September 15 In the Memorandum in Support of his Motion to Vacate the August 11, 1995 Writ of Seizure and Order of Impoundment (the "Motion to Vacate") (Dkt. 42), Mr. Lerma described the process by which the RTC obtained over a million pages of computer material from him, searched that material for nearly two weeks, and saved on disks for further review 139 files -- the vast majority of which ahs nothing to do with copyrighted works of L. Ron Hubbard. Among these documents, copies of which the RTC still retains, are:

o Communications to a special, small Internet group that Mr. Lerma believes to have been previously unknown to

* reprehensible. Although the RTC brought the complaint under traditional secular concepts of copyright and trade secret law, it has become clear that a much broader motivation prevailed -- the stifling of criticism and dissent of the religious practices of Scientology and the destruction of its opponents").

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the Church of Scientology, First Lerma Decl. * 81 (filed in connection with Dkt. 46), concerning matters such as efforts to determine who was responsible for the cancellation of Internet postings critical of Scientology, First Hirsh Decl. Exs. D59, D101, D102, and the strategy to use when demonstrating outside Scientology offices, First Hirsh Decl. Exs. D79, D121- 23;

o A message to a "CONFIDENTIAL LIST" that discusses the need to maintain the privacy of people who express criticism of Scientology on the Internet. First Hirsh Decl. Ex. D64;

o A list of the names and backgrounds of members of the New Civilization Network, First Hirsh Decl. Ex. D76, an organization that includes former Scientologists, First Lerma Decl. * 81;

o Financial, mailing list and planning information about FACTNet, Inc., see Frist Hirsh Dcl. Exs. D84, D99-100, the non-profit organization of which Mr. Lerma is a director and which is devoted to informing the public about groups it considers to be cults, including Scientology, First Lerma Decl. ** 21-23;

o A letter from a defendant in another Scientology lawsuit to his attorney (with a carbon copy to FACTNet) advising the attorney of a legal position to take at a hearing, First Hirsh Decl. Ex. D138;

o A vast collection of Mr. Lerma's e-mail, such as one between him and various people such as Richard Leiby of the Washington Post discussing "Ruby Ridge," First Hirsh Decl. Ex. D61, or another identifying the Scientology presence on America On Line, First Hirsh Decl. Ex. D64, or a third identifying a source of World Wide Web sites for information both "pro and con" on Scientology, First Hirsh Decl. Ex. D60;

o A 108-page file that purports to collect information about Scientologists who died, committed suicide or had psychiatric problems during the "auditing" process by which Scientology instructs parishioners in its teachings, First Hirsh Decl. Ex. D10; and

o A wealth of articles critical of Scientology, see, e.g., First Hirsh Decl. Exs. D3, D9, D14, D23, D28, D35, D51, that, in fact, contain no more information about Scientology's sacred teachings than the RTC;s President has since admitted is contained in a movie script that L. Ron Hubbard sought to market to

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Hollywood, see Declaration of Warren McShane, dated October 26, 1995, * 22(c) (filed as Ex. 70 to Declaration of Helena Kobrin (Dkt. 122)).

In addition to these and other documents that were created by Mr. Lerma or third parties, which under no circumstances could be reasonably construed as copyrighted works of L. Ron Hubbard, the RTC also seized, impounded, and still retains copies of several published works written by L. Ron Hubbard for which RTC does not own the copyright. Sixth Hirsh Decl. ** 3-7, 13-14 & Exs. F & G. The RTC ostensibly based its seizure, search and impoundment upon the Writ of Seizure the RTC obtained at an ex parte hearing on August 11, 1995. In seeking to obtain the Writ, the RTC represented to the Court, among other things, that the review of Mr. Lerma's allegedly infringing materials would be conducted by an "independent expert" -- I-NET -- who was "not connected to [plaintiff] at all." 08/11/95 Hr'g Tr. at 13, 15. I-NET's independence, according to the RTC, ensured that the RTC would not obtain unauthorized access to Mr. Lerma's private materials. Id. at 15.*

* Noticeably absent from the RTC's presentation to the Court at the August 11 exparte hearing was any mention of several facts that were, by any reasonable standard, critical to the Court's proper consideration of RTC's request for the extraordinary relief it was seeking, including:

(1) the fact that Mr. Lerma was being accused by RTC of posting only limited portions of seven different works -- specifically, a total of 64 of more that 700 pages of material, see Opposition of Defendant Arnaldo P. Lerma to Plaintiff's Motion for a Preliminary Injunction at 21-22 & citations to the record and (continued....)

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On August 25, 1995, in the course of a hearing on Mr. Lerma's motion concerning the custody of his materials, the RTC also made representations to this Court about how its search had been conducted. During that hearing, counsel for the RTC (Mr. Cooley) confirmed that counsel for Mr. Lerma (Mr. Sullivan) was "quite correct" in his understanding that "[w]hat the I-NET personnel have done is they do word searches based on three key words. The key words are Thetans [sic], OT Course..., and Hubbard. Those are the three word searches that they are doing." 08/25/95 Hr'g Tr. at 42-43 (Lerma's counsel); id. at 48 (RTC's confirmation). As RTC's counsel put it:

[W]e ran three threads -- I say we -- Mr. [James C.] Settle[] [of I-NET -- ...ran three threads.

Id. at 48. The RTC's Counsel also stressed that nothing had been done to Mr. Lerma's materials. To the contrary, counsel represented on August 25 that

[Mr. Lerma's] hard drive has not been altered in any way. The original hard drive is still the original hard drive. We have not deleted anything from that.

* (...continued) explanations in id. nn.8-9, filed Sept. 11, 1995 (Docket No. 58);

(2) the fact that what Mr. Lerma posted to the Internet was the so-called Fishman Declaration, a 131-page document that was contained in what was at the time of the ex parte hearing an open court file, to which the 64 pages of disputed materials were exhibits, First Lerma Decl. ** 39-44; and

(3) the fact that many of the documents Mr. Lerma was alleged to have infringed actually had been superseded and are no longer in use by the RTC, Fourth Hirsh Decl. Ex. 4 at 84-85 (Dkt. 152).

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Id. at 58. At the August 25 hearing, the Court made its concerns about the breadth of the RTC;s search unmistakably clear. Among other things, the Court asked "[w]hy would Hubbard be a search word," because that term is "such a broad identifier. That would encompass almost the entire universe of Scientology documents. In a search, you try to narrow what you are searching for, not expand it." Id. at 49. The Court noted that , if the search started to exceed the scope of its orders, Mr. Lerma should bring that to the Court's attention:

and we will see whether or not some sort of sanctions are appropriate, because I was concerned about that being a limited scope, just the way a search warrant would be limited to the context of the search warrant if this were a criminal case, and I had issued that warrant.

Id. at 56. When Mr. Settle suggested that the RTC planned yet another, fourth, search, the resulting colloquy was clear:

THE COURT:...Mr. Settle[], I will direct that you are not to conduct any more searches. You have got your three key words that you were looking for. That's it at this point, all right?

MR. SETTLE[]: Yes ma'am.

Id. at 59. At no time during this hearing did anyone affiliated with the RTC suggest that counsel or the Court was wrong in thinking that the only search the RTC had conducted was the three aforementioned "threads." To the contrary, on several occasions, the RTC's counsel referred to the "threads" as the method the RTC used to search Mr. Lerma's material. See id. at 50 (referring to what occurs "[w]hen you run a thread"); id. at 56 (referring to

13

floppy disks being "produced in response to a thread being run and a search being run.") Even as late as the September 15 hearing, counsel for the RTC informed the Court that:

The initial search done by I-NET and Jim Settle [sic] at the office was the three words given by Mr. McShane ["Hubbard," "Thetan" and "OT Course"]. Those form the basis of the entire search and resulted in 139 hits, which were then downloaded to disks. Each file contained {sic] one hit. Copies of all of that material was turned over to counsel.

Second Hirsh Decl. Ex. 2 at 90 (transcript of statement by RTC's counsel) (emphasis added) (Dkt. 93).* By the time of the Court's September 15 ruling, however, it became obvious that the RTC's representations were, at the very least, misleading. First, (-NET was scarcely "independent." Mr. Settle, who supervised the project for I-NET, understood the RTC's counsel to be its "only customer" in this action and the RTC to be the "ultimate client." First Hirsh Decl. Ex. A at 17- 18, 84. "Everything" I-NET did with respect to Mr. Lerma's materials was done at the request of I-NET's "first line of customer" -- William Brinks. Id. Es. A at 171-72.*

* Although counsel went on to state that other searches were conducted after the 139 disks were created, see id. at 90-91, he made pains to suggest to the Court that the 139 disks were, as counsel and Mr. Settle had suggested to the Court during the August 25 hearing, merely the product of three specific word searches.

* In fact, at his deposition, Mr. Settle was so far from "independent" that the RTC's attorneys "instructed" him to assert that all of the written documentation of the searches performed on Mr. Lerma's materials was "work product" generated as part of the RTC's prosecution of this action, and would not be produced (continued...)

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Second, although between August 13 and August 24, Mr. Settle had physically "run" the threads the RTC's counsel described to this Court on August 25, 08/25/95 Hr'g Tr. at 48, 50, 56, "running" the threads was, at best, a physical description. In fact, not only did Scientologists scroll through files themselves to determine which ones contained "hits" and instruct I-NET to save all of those files on disks for further "end to end" review, First Hirsh Decl. Ex. A at 118-22, 151 & Ex. B2 at 53-54, the RTC alone knew what review had been conducted thereafter. I-NET never again saw the disks it turned over to the RTC, id. Ex. A at 155-56, 176, and did not know who reviewed those disks, what material found on the disks had been reviewed, or even whether the disks were reviewed at all. Id. at 152-53, 163-64. Third, the RTC did not limit itself only to three searches; at its direction, I-NET performed at least two additional searches for terms no one had mentioned to the Court -- "Grady Ward" and "Scamidzat." Declaration of James Settle (filed Sept. 20, 1995) * 31. Fourth, the RTC performed further searches of files that were identified, not through the use of any of the five search

* (...continued) in response to a subpoena duces tecum. Id. Ex. A at 37-41, 66- 67. On instructions from RTC's counsel, Mr. Settle withheld I-NET's working papers -- its notes, including a log of who reviewed Mr. Lerma's materials, what searches were conducted and what was located, its report to plaintiff -- and testimony about discussions Mr. Settle had with RTC's counsel prior to his deposition. Id. The RTC subsequently abandoned its objection.

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terms, but solely by reviewing the file directory titles. Id. * 35. Through this process, the RTC chose to impound on separate computer disks 139 of Mr. Lerma's files -- files that range from one or two pages to several hundred pages long, sometimes consisting of multiple documents in a single computer "file." First Hirsh Decl. * 19 & Ex. A at 124, 128-29, 142, 158, 191. The RTC retained and, to this day, continues to retain these 139 disks, notwithstanding that, by September 15, it had conceded that 119 of the 139 files contain no material that infringed any copyright of L. Ron Hubbard. See Plaintiff's Opposition to Mr. Lerma's Motion to Vacate the Writ of Seizure at 9 (filed Sept. 15, 1995 (Dkt. 59) (alleging infringements on only 20 of the 139 disks). Indeed, by October 19, 1995, RTC had conceded that only 18 files involve material it alleges is infringing, Sixth Hirsh Decl. ** 3-5; Third Hirsh Decl. ** 3-12, eight of which contain material in which the RTC has no copyright interest, Sixth Hirsh Decl. ** 6-7. Moreover, despite extensive briefing, the RTC has not presented a single explanation for how anyone ever imagined that any of dozens of files discussed in Mr. Lerma's Motion to Vacate (and summarized above) were a copyrighted work of L. Ron Hubbard. Notwithstanding all of the foregoing, the RTC sought to reassure the Court of the integrity of the process. On September 20, 1995, the RTC filed a Declaration from Mr. Settle asserting that the RTC had been the victim of "false accusations" and that

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the Court had allowed those accusations "to overshadow the merits of the case and order the victims to return the seized materials used in commission of the illegal acts to the very criminals themselves," Settle Decl. * 2 -- apparently referring to Mr. Lerma. To support this statement, the Declaration made numerous representations; among other things, this Declaration:

(1) Assured the Court that the review of files identified only by name that the RTC had not previously disclosed was only "done of a small portion of the C-drive" and that "one of the RTC's designees" merely "looked at a short list of directory titles and identified a few that appeared likely to have infringing materials in them," id. * 35;

(2) Bolstered the RTC''s previous representation that Mr. Lerma's "hard drive has not been altered in any way," 08/25/95 Hr'g Tr. at 58, by informing the Court that "[p]rocedures were used at all times which would avoid altering the original information on the floppy disks and hard disks," id. * 30(b);

(3) Represented that "[e]ach step of the examination was documented and can be re-created," id. * 30(c);

(4) Stated that Mr. Settle "carefully read the Writ of Seizure prior to the seizure, so that [he] would understand the scope of what was covered," id. * 11, and that "the I-NET employees ensured that the reviewer for RTC did not ...review material clearly not pertinent to the Writ of Seizure, id. * 30(g);

(5) Asserted that "there was absolutely no abuse whatsoever in the searches that were done in this case." Id. * 41.

As the discussion below makes plain, these representations do not comport with the now-available evidence.

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B. The Court's September 15 Order and November 29 Opinion By Order dated September 15, 1995, supported by the November 29 Opinion, the Court (1) denied the RTC's request for a preliminary injunction against Mr. Lerma; (2) "absolved [Mr. Lerma] of any obligation under previous restraining orders of this Court"; (3) vacated the Writ of Seizure and Order of Impoundment; and (4) ordered the RTC immediately to return all of the materials it had seized from Mr. Lerma. The Court found, among other thins, that:

o "[T]he primary motivation of RTC in suing Lerma, DGS and The Post is to stifle criticism of Scientology in general and to harass its critics," November 29 Opinion at 13;

o "[W]e now know that counsel for RTC determined ex parte what materials would be subject to impoundment based upon judicial authority," id. at 16;

o "Moreover, Lerma has effectively demonstrated that -- as a direct result of the seizure and RTC's involvement in the searching -- the RTC has acquired confidential information of great import to them and of secondary (at best) relevance to the litigation"; id.

Although declining to find on the basis of the record then before it that "RTC's participation in the search and seizure rises to the level of a 'fraud on the Court,'" November 29 Opinion at 16, the Court concluded that "RTC violated the spirit if not the letter of the seizure writ, and misled the Court as to the way in which the Lerma materials were maintained and reviewed." Id. at 17. For this, and other reasons, the Court found that there was a "problem of unclean hands on the part of

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RTC" that "mandates denial of the equitable relief" it5 sought against Mr. Lerma and DGS. Id.

C. The Record Revealed By Discovery Since September 15 Discovery since September 15 has revealed, inter alia, the following additional facts: 1. Although the RTC has represented to this Court that it had supplemented its string searches by choosing to review by name only "a few [directory titles] that appeared likely to have infringing materials in them," Settle Decl. * 35, the RTC actually reviewed 800 files selected by name and not by the presence of any search term. When the RTC told the Court that it had limited its search by using three "string searches" ("Thetan," "Hubbard" and "OT Course") that subsequently became five (adding "Grady Ward" and "Scamidzat"), it failed to inform the Court that this was not the predominant means by which the RTC reviewed Mr. Lerma's materials. Mr. Settle estimates that, while the RTC located approximately 500 files for initial review through the string searches, it located 800 files simply by going through the names of Mr. Lerma's directories and files and picking out those it wished to review. Sixth Hirsh Decl. Ex. A at 377-79. 2. The RTC knew before reviewing these 800 files that none of them contained any of the five search terms that RTC had chosen to identify its works. Prior to the time that a Scientologist decided to review the approximately 800 files selected only on the basis of their names, I-NET already had

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identified all files containing every one of the five search terms the RTC chose to use. I-NET completed its string searches for all five search terms by August 16, 1995, see Sixth Hirsh Decl. Ex. A at 337-51, 360-71 & Ex. A10 at R003079-81, Roo3127, R003154-55, and I-NET had already located for the RTC all the files in Mr. Lerma's "C-drive" that contained the search words, or "threads," id. On August 17-18, however, RTC decided to suspend its review of the files identified by the threads so that it could instead concentrate on files that did not contain any search words. Id. Ex. A at 302-03, 373-78, 389-93 & Ex. A10 at R003221, R003278-81. In fact, on August 13-14, the RTC had already located every one of the 18 files it was ever going to find containing what it now alleges to be copyrighted materials of L. Ron Hubbard by use of the string searches. Sixth Hirsh Decl. ** 8-12. Indeed, it appears that every one of the files the RTC maintains contains confidential material over which it holds a copyright was located by the use of the single search word "thetan" and was already designated for impoundment no later than August 14. Id. ** 8-10. 3. Contrary to its representations, Settle Decl. * 30(c), the RTC neither "has documented" nor "can re-create" a list of the 800 files it reviewed on the basis only of their names. The RTC has only limited information about those files. It is clear that the decision to identify files for review merely by name was not Mr. Settle's idea. Sixth Hirsh Decl. Ex. A at 279. Rather, Ms. Sue Taylor (one of the two Scientology officials who had

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earlier confronted Mr. Lerma at his home) wrote out a list of additional files that I-NET pulled for her review. Id. at 377. I-NET's logs (which RTC produced only after Mr. Lerma filed a motion to compel their production), contain no record of the files the RTC reviewed -- only the files I-NET saved, at a Scientologist's request, on to one or another of the 139 disks. Id. Ex. A at 377 & Ex. A10 at R003278-81. 4. The names of the files the RTC saved from this previously undisclosed review belie any claim that the RTC limited itself to files that "appeared likely to have infringing materials in them." Settle Decl. * 35. According to Mr. Settle's log, the names of files that Scientologists not only selected for review, but saved on to disks for further review, include 23 files with the name "C:\NETMANAG\EMAIL\ALERMA\INBOX" followed by alpha-numeric file identifiers; eight files with the name "C:\NETMANAG\EMAIL\POSTMAST\INBOX" followed by similar alpha-numeric file identifiers, and other files with names like "C:\COM\HACK," "C:\COM\NEEDHELP," and "C:\COM\INDEX." See Sixth Hirsh Decl. Ex. A at 389-93 & ex. A10 at R003221, R003279-81. As even a layperson easily can surmise from these file names, they contain e-mail sent to Mr. Lerma by third parties and related documents. During the search, Mr. Settle warned the RTC that reviewing e-mail raised special privacy concerns, id. Ex. A at 384-88, yet he conceded that the RTC reviewed what appear to be whole directories full of files based on nothing more than the expectation that they contained e-mails, id. Ex. A at 390-91.

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5. Information about Mr. Lerma that has nothing to do with Scientology but that was contained in the 800 files the Scientologists reviewed on the basis of their file names has been used by RTC for purposes having nothing to do with this litigation. Because the RTC's search was not in any sense "limited" to documents in Mr. Lerma's possession that contained one or more of the five search words such as "Hubbard" or "thetan," its review was not limited to documents that had something to do with Scientology. For example, Mr. Settle testified that, during their review of the files Ms. Taylor selected by name, Scientologists and Mr. Settle reviewed a "fair number" of documents "on the order of five or ten," that "discussed right- wing militia groups." Sixth Hirsh Decl. Ex. A at 380-81. Although Mr. Settle recognized that information on right-wing militias was not something the Scientologists were there to look for, Sixth Hirsh Decl. Ex. A at 381, it was not so clear that the Scientologists felt similarly. In an article entitled "[Cult Awareness Network] Members Linked to Right Wing Extremists, " appearing in a September 1995 publication entitled "Membership News," an organization called the "CAN Reform Group" reported:

Sources close to the recent raids on Wollersheim and Lerma have learned that Lerma is deeply involved in the Virginia Militia, a right wing 'patriot' group.

Sixth Hirsh Decl. Ex. H at 2. The Cult Awareness Network is an organization sharply critical of Scientology and, while the "sources" for this article attacking the Network are unnamed, neither Mr. Lerma nor his attorneys disclosed the information --

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and only the RTC and its attorneys were in possession of the e-mail in question.* In addition, on August 12, 1995, almost immediately after the raid on Mr. Lerma's home, pro- Scientologists posted a series of press releases to the Internet regarding the raid. See Sixth Hirsh Decl. Ex. P (copies of press releases). 6. Contrary to still other representations it made to this Court, the RTC's review has permanently altered Mr. Lerma's C-drive. On August 24, 1995 (the day before the RTC represented to the Court that Mr. Lerma's "hard drive has not been altered in any way," 08/25/95 Hr'g Tr. at 58, and nearly a month before the RTC attested through Mr. Settle that "[p]rocedured were used at all times which would avoid altering the original information on the floppy disks and hard disks," Settle Decl. * 30(b)), the RTC completely destroyed a large file on Mr. Lerma's C-drive. Sixth Hirsh Decl. Ex. A at 211-16 & Ex. A10 at R003074.* Even

* This article about the raid and the attempt to portray Mr. lerma in an unflattering light doubtless are part of the Church's "fair game" policy, a tactic by which the Church attempts to "neutralize the 'heretic' by stripping this person of his or her economic, political and psychological power." Wollersheim v. Church of Scientology, 260 Cal. Rptr. 331, 341-42, 349 (Ct. App. 1989) (evidence supported finding that Church imposed "fair game" on Mr. Wollersheim after he began to criticize Scientology and that the Church set out to ruin him by, inter alia, destroying his business and leaking embarrassing information about him that it had obtained in confidence), vacated and remanded for reconsideration on other grounds, 499 U.S. 914 (1991); see also Sixth Hirsh Decl. Ex. E at 4-6 (RTC's own newspaper includes various charges of immoral conduct by former members).

* Mr. Settle testified that a copy of the document in question appears to be on Mr. Lerma's D-drive (although he did not look at it). Id. Ex. A at 213-16. He also asserted that (continued...)

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earlier, on August 14 (according to the logs, id. Ex. A10 at R003081) or August 15 (according to I-NET's report, id. Ex. A10 at R003074), the RTC saved onto Mr. Lerma's C-drive a file it generated in the course of searching that drive, id. Ex. A at 313-14, in effect planting information on that drive and altering it substantially. Indeed, RTC apparently saved at least one other file to Mr. Lerma's C-drive on August 12, although Mr. Settle had no idea how the document came to be put there or what it contained. Id. Ex. A at 413-20 & Ex. A10 at R003289.* 7. Instead of reviewing specific files located by search terms and "a small portion of the C-drive" by identifying files by name, Settle Decl. * 35, the RTC in fact reviewed approximately 30 percent of the files on Mr. Lerma's C-drive. Sixth Hirsh Decl. Ex. A at 474-78.

* (...continued) I-NET would in any event have initially copied it onto a duplicate of the C-drive Mr. Settle made for Mr. Lerma. Id. Ex. A at 472-74. However, Mr. Settle is uncertain whether he deleted the document from the duplicate C-drive before sending it to Mr. Lerma. Id. Ex. A at 485.

* In the Colorado action against FACTNet, Larry Wollersheim and Robert Penny (where the RTC also employed I-NET for purposes of reviewing the computer files of those defendants), an independent analyst appointed by the Court has now determined that RTC destroyed, altered and otherwise used or misused significant portions of the computer files and equipment it seized from them. See Sixth Hirsh Decl. Ex. L (Report of Special Master) at 3 (computers were used to send or receive by fax unidentified materials to unknown third parties while in possession and control of RTC), 8-11, 13-15, 16-18, 23 (detailing that scanner and other equipment was used while in RTC's possession). Mr. Lerma, of course, has not yet had the opportunity to examine his computer and related materials for similar evidence of misuse.

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8. Contrary to the RTC's assertions, none of this process was authorized by the Writ its own lawyers drafted. By its terms, the Writ (which, with the exception of certain language deleted by the Court, was drafted by the RTC) authorized the United States Marshal to serve the Writ upon Mr. Lerma, to seize from Mr. Lerma's home copies of OT-I through OT-VII, articles and things that appeared to be works of L. Ron. Hubbard protected by copyrights, and reproduction materials including computers with memory capacity, * "to hold the articles so seized in a safe place and to forthwith deliver all such articles to the custody of counsel for plaintiff." August 11, 1995 Writ of Seizure, at 1-2. As Mr. Settle explained, he understood that this Writ was supposed to govern the RTC's review of Mr. Lerma's computer files:

Q: Now, first of all, what was your understanding of the authority that you had to search - I'm not talking about the authority to search [Mr. Lerma's] home, but once you got the material, what was your understanding of the authority that you had to search the computer materials that had been taken from his home?

A: The authority was the writ of seizure and what it specified to look for.

* The Writ described the articles that could be seized as "any and all copies, reproductions, or embodiments of all or any part of the literary works identified on Exhibit A to the [Original} Complaint ...," (i.e., OT-I through OT-VII), "including any computer disks and printed materials; all plates, molds, matrices, masters, tapes, or other articles by which such copies, reproductions, or embodiments may be reproduced; any articles and things that appear to be works of L. Ron Hubbard protected by copyrights: optical scanning equipment; and all personal computers (including all ancillary equipment and disk drives, disks and other things with memory capacity) found at or within the above-described locations." Sixth Hirsh Decl. Ex. A17.

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Sixth Hirsh Decl. Ex. A at 449. Once shown the Writ, however, Mr. Settle conceded that it contained no language authorizing either the Marshal, or the RTC, to conduct any search of Mr. Lerma's material once it had been seized and secured:

Q: Now, could you point me to which in this writ of seizure authorized you to search Mr. Lerma's computer materials?

A: This writ only addresses seizure, storage, authority to enter the residence, serve the defendant with a copy of the writ. That's all it covers.

Q: From where did you drive the authority to search Mr. Lerma's computer materials after they had been seized?

A: From representations made by William, Brinks, the [RTC's] law firm.

Sixth Hirsh Decl. Ex. A at 449-50 (emphasis added).

D. Security

On August 12, 1995, during the first afternoon the RTC had seized Mr. Lerma's computer materials, the RTC located a file entitled "SENT-MAI.L-J" that contained the Fishman Declaration, First Hirsh Decl. Ex. A at 112-13, 168, 181; Sixth Hirsh Decl. * 10 & Ex. A at 296-97, 326-31, and, thus, some 64 pages of materials that the RTC alleges constitute its secret, sacred scriptures.* For nearly two weeks (between the afternoon of

* During the first day of his deposition, Mr. Settle suggested that this document was located through the three initial string searches. First Hirsh Decl. Ex. A at 112-13. Mr. Settle's logs, however, do not reflect that any string searches were performed on August 12. Sixth Hirsh Decl. Ex. A10 at R003076-77, R004022-36. On reviewing his logs during the second day of his deposition, Mr. Settle could not recall how the Fishman Declaration was located. Sixth Hirsh Decl. Ex. A at 296- 97, 326-31.

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Saturday August 12, 1995, when I-NET brought the materials to the offices of RTC's counsel Willian Brinks and located a copy of the Fishman Declaration, to the evening of Friday, August 25, 1995, when, on court order, I-NET finally secured the materials), all of Mr. Lerma's materials -- including the Fishman Declaration --- sat in an unlocked conference room at Willian Brinks. First Hirsh Decl. Ex. A at 56-59. This lack of security is notable for two reasons. First, the RTC cannot prove a chain of custody sufficient to demonstrate the integrity of the materials it seized from Mr. Lerma.* Second, and more importantly, the fact that RTC left Mr. Lerma's materials -- including the portions of its "secret" scriptures contained in the copy of the Fishman Declaration stored on the computer disks -- unlocked and unguarded for two weeks speaks volumes about RTC's true motivation is bringing this litigation has been its quest to protect the secrecy of sacred scriptures --

* I-NET's chain of custody ended on August 12, 1995; for nearly two weeks thereafter, the law firm where the materials were stored had "an alarm system on the general premises," but no person to guard the room. Id. at 55, 59-60. The only protection for Mr. Lerma's hard drive was that Mr. Settle "salted" Mr. Lerma's computer each night by directing it to what he called an "obscure" directory. Sixth Hirsh Decl. Ex. A at 241-56. The protection afforded by this procedure was that sometimes, but not always, the computer would go back to the "obscure" directory when Mr. Settle turned it on the following morning. Id. at 241-54. Accordingly, if someone looked at Mr. Lerma's materials and was not careful enough to employ one of a "lot of ways" available to look at materials without altering the turned it off, id. at 255-56, Mr. Settle might have been able to notice "some indications." Id. at 250-51. Mr. Settle acknowledges that the system was "not f[oo]lproof." Id.

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that it "has taken every step known to man to protect the secrecy and the integrity of these documents." 08/25/95 Hr'g Tr. at 11 (statement by RTC's counsel).21/ Indeed, the RTC even goes so far as to argue that release of its documents "could wreak destruction on a planetary scale." and might empower "'psychiatrists or even states. . . to enslave people.'" November 29 Opinion at 8 (citations to RTC's brief omitted). Yet, when the Scientologists allegedly found what they considered to be their "sacred scriptures" on Mr. Lerma's computer -- scriptures that, they assert, could "loose a hurricane upon the world," id. -- they simply turned out the

-------------------------- 21/ For example, in moving the Court to reconsider its decision, on RTC's motion for a preliminary injunction against The Post, the RTC wrote:

The Scientology religion includes the core belief and practice that the spiritual destiny -- indeed, the very salvation of every man, woman and child in the universe -- depends upon precise application of these materials exactly as set forth in Scientology scripture by L. Ron Hubbard. That belief and practice always have and always will include never permitting disclosure of these materials to anyone who has not progressed through the necessary spiritual prerequisites because to do so would cause profound harm to the person prematurely exposed. * * * The belief and practice of preserving the confidentiality of these scriptures is as fundamental to Scientology as the belief in the Resurrection is to Protestants, as a literal interpretation of the Bible is to Fundamentalist Christianity, as strict adherence to the dietary law of the Torah is to certain Jewish sects or as the belief in the absolute sanctity of life -- including fetal life -- is to a devout Catholic.

Memorandum in Support of Plaintiff's Emergency Motion for Reconsideration & Rehearsing (Dkt. 34) at 4-5 (citing Third Declaration of Warren McShane `` 8, 34-41, 54).

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lights, closed the (unlocked) door, and went home, see Sixth Hirsh Decl. Ex A at 240-41, 297-98, taking with them instead copies of dozens of documents written by Mr. Lerma and third parties about their fight against Scientology. And they did so notwithstanding Mr. Settle's own preference, id. at 298-99, recommendation and expectation, First Hirsh Decl. Ex. A at 54-57, 71, that the computer disks be put in a locked room. The only reasonable conclusion to be drawn from this conduct -- in fact, the one to which Mr. Settle testified, id. Ex. A at 298-99 -- is that RTC had no real interest in "securing" its scriptures; what it wanted (an got) was access to Mr. Lerma's personal files, and all of the information they revealed about critics of Scientology.

III. RTC'S OTHER ABUSIVE CONDUCT IN THE COURSE OF THIS CASE AND IN THE PARALLEL PROCEEDING IN COLORADO.

The RTC's abuse of the judicial process is not limited to its unauthorized rampage through Mr. Lerma's private documents; it extends as well to its use of this Court's authority as a vehicle to harass and punish Mr. Lerma by the simple means of literally burying him in costly and burdensome litigation. A simple measure of the intensity with which RTC has undertaken (and succeeded) in this task is the Clerk's docket which, as of this writing, reflects 270 entries. Of course, that fact in itself shed little light on the nature of the RTC's litigation conduct, but addresses only its volume. A review of the RTC's pleadings, however, is even more revealing of the apparent purpose behind its no-holds-barred style of litigation. since

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this action was filed some four and a half months ago (and since RTC learned that Mr. Lerma's defense is being funded by an insurance policy issued to FACTNet, Inc., the single limit of which applies to both this action and the Colorado proceeding and shortly will be dissipated by defense costs, see Fourth Declaration of Arnaldo P. Lerma (copy filed herewith) 2-5), the RTC has, inter alia:

* Amended its complaint once by right and once by leave of court upon a motion filed so unjustifiably late in the case that Magistrate Judge Jones recognized Mr. Lerma would suffer prejudice with an extension of time in which to take discovery, 10/30/95 Hr'g Tr. at 78-80, and then filed a "verified" version of its Second amended Complaint after Mr. Lerma had already filed his Answer, requiring Mr. Lerma to make yet another submission to the court;

* Repeatedly submitted "supplemental" briefing after the Court had ruled;

* Initiated a separate proceeding in federal court in Florida to compel further deposition of Steven Fishman, a Florida witness with no knowledge pertinent to any issue in this case;

* Moved to compel the further deposition of Mr. Lerma but never reopened deposition after it was granted the right to do so;

* Moved to seal Mr. Lerma's brief in opposition to its motion for a preliminary injunction on the frivolous ground that it discussed the materials at issue in this case, required Mr. Lerma to file a response, but never brought its motion on for hearing;

* Refused to produce David Miscavige for deposition and when Mr. Lerma prevailed on his motion to compel, filed a motion for reconsideration of the magistrate's order and, when it was denied, filed an objection with the District Court which was rejected on the merits but deemed moot because of other developments, 11/17/95 Hr'g Tr. at 33-40;

* Files dozens of affidavits and declarations that either constituted hearsay or represented attempts to submit

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the opinions of attorneys and scholars on the proper interpretation of copyright law that Mr. Lerma was required to (successfully) move to strike, and, notwithstanding the Court's order striking these affidavits, RTC refiled one of the affidavits in connection with a later motion, see Order of November 9, 1995 at 1 (Dkt. 213) ; RTC's Objections Re Ruling on Motion to Strike Objections Re Disclosure of Advanced Technology Documents to Robert Vaughn Young, Ex. B. (Dkt. 188)

* Refused to produce to Mr. Lerma complete copies of OT I through OT VII, not withstanding that its First Amended Verified Complaint alleged that these works were "relevant to this action," First Amended Verified Complaint 27 & Ex. A (dkt.14) and that RTC told the Court it would produce them, Second Hirsh Decl. Ex. 2 (09/15/95 Hr'g Tr.) at 18;

* Refused to produce to Mr. Lerma copies of the complete versions of the various additional levels of Advanced Technology "collective works" that it placed in issue with its Second Amended Complaint and, when Mr. Lerma prevailed on his motion to compel, filed an objection that was, in relevant part, overruled, see Order of November 27, 1995. 22/

The RTC's persistent attempts to obtain a stay pending appeal are particularly revealing. When the Colorado court, like this Court, denied RTC's request for a preliminary injunction and ordered it to return to the Colorado defendants all their property that has been seized by RTC, the RTC unsuccessfully sought a stay before the Tenth Circuit. Sixth Hirsh Decl. Ex. I. RTC then sought a stay from the United States Supreme Court and, when that petition was denied by Justice Breyer, id. Ex. J, it renewed its application for stay with Justice Souter, who likewise denied

---------------- 22/ It also filed, without proper grounds, multiple motions for reconsideration, a tactic this Court sharply criticized. See November 29 Opinion at 1-2. 31

the RTC's request, id. Ex. K Despite these consistent rulings against it in the Colorado case, when this court similarly denied RTC's request for a stay of the similar orders here, RTC (1) filed a motion for reconsideration with respect to the Post. (2) Filed an interlocutionary appeal with the Fourth Circuit with respect both to the Post and to Mr. Lerma, (3) made an unsuccessful motion for a stay pending appeal in this Court, (4) filed an unsuccessful motion for stay pending appeal in the Fourth Circuit, and (5) most recently, filed; a motion for reconsideration of the Fourth Circuit's order denying its request for a stay pending appeal, asserting (again) a position unanimously rejected by two district court judges, six circuit court judges and two Supreme Court justices.23/ The effect of this conduct on Mr. Lerma's limited financial ability to mount a defense is obvious. See Fourth Lerma Decl. 2-5. Nor is the imposition of financial burden the only abusive tactic in the RTC's litigation arsenal. Throughout its volumous pleadings, the RTC spares no ink in attacking those who criticize it:

------------------ 23/ As of this writing, RTC has refused to withdraw its interlocutionary appeal from the Orders denying its motions for a preliminary injunction with respect to the Post and Mr. Lerma, notwithstanding that the Post subsequently obtained final judgement in its favor on all counts of the complaint, and that Mr. Lerma was awarded summary judgement in his favor on the trade secrets claim. Thus, under the Fourth Circuit's current briefing order, Mr. Lerma will be required to file his brief on the merits of the interlocutory appeal shortly after trail in this action is completed.

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Mr. Lerma: In pleadings before this Court, the RTC has referred to Mr. Lerma as, among other things, a "spite[ful] . . . religious bigot []," Second Amended Verified Complaint 2, and a "criminal," Settle Decl. 2. The Post: The RTC accused the Washington Post of "coddl[ing] thieves," Memorandum in Support of Plaintiff's Emergency Motion for Reconsideration and Rehearing at 15 (Dkt. 34, and its reporter, Richard Leiby of "going out of his way to issue venomous attacks on the Church's practices, members, ecclesiastical management, policies, goals and charitable programs," Second Amended Complaint 60, so as to promote "his campaign of harassment against the Scientology religion." Id 61. FACTNet: The RTC's pleadings before this Court call FACTNet a "religious hate group," Opposition to Plaintiff to Defendant Lerma's Motion to Strike the Objection by [RTC] to Disclosure of Advanced Technology Documents to Robert Vaughn Young at 2 (Dkt. 188) Vaughn Young: When Mr. Lerma identified Robert Vaughn Young as an expert witness, the RTC filed a brief branding him "an apostate," who "has spent [a] half decade converting his spite into chronic unemployment and a recent personal bankruptcy." Id. at 1-3 (attaching bankruptcy filing as an exhibit). It also accused him of "blackmail." Id at 9-10.

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Jeff Jacobsen: When the RTC decided to depose Jeff Jacobsen in this action, it gave to quarter. In the course of a deposition in which RTC inquired into patently irrelevant matters as diverse as Mr. Jacobsen's sister's involvement with Scientology, Affidavit of Duane W. Krohnke 6 & Ex. A at 95 (Dkt. 227), his volunteer work for the Cult Awareness Network, id. 6 & Ex. A at 17-20, 65-66, 100, 103-04, 139-41, his dealings with others who apparently attempt to deprogram cult members, id. 6 & Ex. A at 66-67, 139, 173, 177-78, the RTC asked Mr. Jacobsen such questions as whether he, Jacobsen, was "involved in the publication of pornography," id 7 & Ex. A at 64, what relationship there was between FACTNet and the Ku Klux Klan, id. 7 & Ex A at 115, whether Mr. Wollershiem was a "drug addict." or a "mental case," id 7 & Ex. A at 94, and whether "Lerma, Wollershiem or other FACTNet staff . . . have committed any other acts of religious persecution," or "hate crimes." Id 7 & Ex. A at 115, 116. 24/ The RTC has engaged in the same sort of conduct, including character assassination and harassment, in the Colorado proceeding. Thus, for example, when it applied ex-parte to that court for a temporary restraining order and writ of seizure, it submitted various offensive and defamatory hearsay statements about Mr. Wollershiem including, e.g., allegations that he "defrau[ed] investors" and was a draft dodger. See Sixth Hirsh --------------- 24/ The RTC also used this occasion as the opportunity to pocket and refuse to return a computer disk Mr. Jacobean brought with him to the deposition. Id 11-12 & Ex. E.

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Decl. Ex. N 41-42 (declaration of Warren McShane submitted in support of RTC's motion for a writ of seizure in the Colorado action), while simultaneously omitting to inform the Colorado court, inter alia, that the document Mr. Lerma was accused of posting had been in a public court file in California for 28 months, that the California courts had declined to seal it, and that the Washington Post had a copy of the document. In the case of its search of Mr. Wollershiem's computer files, RTC dropped all pretense of conducting a "narrow" search and, instead, looked for such "key" words as "Abrams" (Floyd Abrams, the attorney currently defending Time magazine in a libel action brought by the Church), "Behar" (Richard Behar, the author of the Time article), as well as the names of three of Mr. Wollershiem's attorneys and the name of a judge. See Sixth Hirsh Decl. Ex. O (RTC's list of search terms). While no party should be penalized for availing itself of all reasonable opportunities to vindicate its rights, the RTC's litigation conduct here goes far beyond what, by any definition, is reasonable, particularly when considered, as it must be, against the backdrop of its founder's admonition that litigation should be used "to harass and discourage rather than to win." See supra, n. 3.

ARGUMENT

The RTC's reprehensible conduct of this litigation entitles Mr. Lerma to judgement in his favor on either of two separate and independent grounds:

35

(1) The RTC has misused its copyrights and there are no genuinely disputed issues of material fact that preclude the court from entering summary judgement in Mr. Lerma's favor on the basis of this affirmative defense; and

(2) Evidence not available to Mr. Lerma nor before the Court at the time of its September 15 ruling establishes that the RTC's conduct in this litigation amounts to a fraud on the court, as a sanction for which the Court should dismiss the RTC's complaint.

Whatever may be the "objective" basis of the RTC's copyright infringement claims (a subject addressed separately in Mr. Lerma's Opposition to the RTC's Motion for Summary Judgement), its conduct has so poisoned the judicial process that it is no longer entitled to the protection of the Copyright Act or to the aid of this Court.

I. MR. LERMA IS ENTITLED TO SUMMARY JUDGEMENT ON THE RTC'S INFRINGEMENT CLAIMS BECAUSE, AS A MATTER OF LAW, THE RTC HAS MISUSED ITS COPYRIGHTS

The Court of Appeals has squarely held that misuse of copyright is a valid affirmative defense to a claim of copyright infringement. Lasercomb America, Inc. v. Reynolds, 911 F.2d 970, 979 (4th Cir. 1990) (where plaintiff had attempted to assert rights greater than those granted by Copyright Act, defendants were entitled to judgement in their favor regardless of fact that they indisputably and willfully had infringed plaintiff's copyrights for profit). As the Fourth Circuit succinctly put it, "[a] successful defense of misuse of copyright bars a culpable plaintiff from prevailing on an action for infringement of the misused copyright." Id. at 972. The dispositive question is "whether the copyright is being used in a manner violative of the

36

public policy embodied in the grant of a copyright." Id. at 978. In Lasercomb, the plaintiff software manufacturer had licensed a computer program to the defendant, who first illicitly copied the program for its own use and, then, copied a substantial portion for use in a program that it marketed in competition with the plaintiff. The District Court rejected the defense of misuse of copyright and found in favor of plaintiff on its infringement claim. Id. at 972. The Fourth Circuit, however, reversed. Observing that the grant of a copyright is intended to further a public policy "'to promote the Progress of Science and useful Arts, by securing for limited Times to [Authors] . . .the exclusive Right . . .' to their ['original' works]," the Fourth Circuit noted that this same public policy "forbids the use of the [copyright] to secure an exclusive right or limited monopoly not granted by the [Copyright] Office and which is contrary to public policy to grant." Id. at 977 (alteration in original) (citations omitted). In this regard, the Fourth Circuit observed that Lasercomb had attempted to impose upon its customers a 99- year licensing agreement that purported to prevent them from developing any competing products, effectively "suppress[ing] any attempt by licensee to independently implement the idea which [Lasercomb's computer program] expresses." Id. at 978. The Court concluded that Lasercomb's "attempt to use copyright in a particular expression, [the computer program], to control competition in an area outside the copyright." id at 979,

37

"amounts to misuse of its copyright," id. indeed, although the defendants in Lasercomb had not actually executed the offensive agreement, the Fourth Circuit held that the public interest in preventing the misuse of copyright is so strong that "the defense of copyright misuse is available even if the defendants themselves have not been injured by the abuse." id.25/ The defense of misuse of copyright is appropriate for resolution on summary judgement. See Qad, Inc. v ALN Assocs., Inc., 770 F. Supp. 1261, 1263 (n>D. Ill. 1991) ("Qad") (granting summary judgement to defendant on affirmative defense of misuse of copyright), appeal dism'd in relevant part, 974 F.2d 834, 837 ------------

25/ Other courts have likewise recognized the defense of misuse of copyright. See, e.g., Quad, Inc. v. ALN Assocs., Inc., 770 F Supp 1261, 1266 (N.D. Ill. 1991) ("Qad") ("when a copyright holder attempts to use legal proceedings to protect an improper extension of a copyright, the court may refuse to enforce the copyright" and. accordingly, grant summary judgement to defendant), appeal dism'd in relevant part, 974 F.2d 834, 837 (7th Cir. 1992) (appellate court lacked jurisdiction over interlocutionary appeal); National Cable Television Ass'n v. Broadcast Music, Inc. 772 F. Supp. 614, 652 (D.D.C. 1991) (equitable defense of copyright misuse, which bars infringement action, requires showing that copyright owner "somehow illegally extended its monopoly or otherwise violated the public policy underlying copyright law") ; F.E.L. Publications. Ltd. v Catholic Bishop of Chicago, No. 81-13333, 1982 WL 19198, at *5 n, 9 (7th Cir. Mar 25, 1982) ([d]ismissal of a copyright claim for misuse is an equitable defense which requires a balancing of the equities"), cert denied, 459 U.S. 859 (1982); see also PRC Realty Sys., Inc v. National Ass'n of Realtors, 972 F. 2d 341, 1992 WL 183682, at *12 (4th Cir. 1992) (unpublished disposition; pursuant to 4th Cir. Internal Op. P. 36.6, a copy filed herewith as Ex. M to the Sixth Hirsh Decl.) (plaintiff who has misused copyright by attempting "to suppress any independent expression of the idea at issue" is barred from proceeding with infringement action). Cf. Electronic Data Sys Corp. v Computer Assocs. Int'l, Inc., 802 F. Supp. 1463, 1465-66 (N.D. Tex. 1992) (permitting plaintiff to assert affirmative claims for damages and declaration that defendants copyrights were unenforceable because of defendant's misuse of copyrights).

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(7th Cir. 1992) (appellate court lacked jurisdiction over interlocutionary appeal from order granting judgement where other claims remained to be resolved) .26/ The undisputed facts in the present case reveal that RTC has misused its purported copyrights in at least two distinct ways: (1) RTC has employed its purported copyrights to obtain a Writ of Seizure and Order of Impoundment under the Copyright Act and, thus cloaked with this Court's judicial authority, conducted what this Court already has recognized as an "improper" top-to-bottom search of the computer records of one of Scientology's critics, effectively silencing him and obtaining a vast trove of information about other critics and opponents of Scientology, all the while assuring the Court that it did not do what the record now clearly discloses it has done; and

(2) RTC has employed this action, founded on its purported copyrights, and the litigation process generally as a means to harass, burden, and punish Mr. Lerma for his criticism of Scientology.

On either of these independent bases, Mr. Lerma is entitled to judgement as a matter of law on RTC's copyright infringement claims. See Lasercomb, 911 F.2d at 978; Qad, 770 F Supp. at 1263./27

-----------------

26/ It is hornbook law that a court should grant summary judgement if. viewing the evidence in the light most favorable to the non-moving party, there is no genuine issue as to any material fact. E.g. White v. Federal Express Corp., 729 F Supp. 1536, 1553 (E.D..,Va. 1990), aff'd, 939 F.2d 157 (4th Cir. 1991)

27/ A finding of misuse of copyright does not invalidate the copyright, but bars enforcement of it unless and until the owner has purged itself of the misuse. Lasercomb, 911 F. 2d at 979 n. 22 There is no way that the RTC can purge itself of any of the misuses at issue here, at least with respect to Mr. Lerma. See Qad, 770 F. Supp at 1271 n.23.

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A. RTC Used The Writ Of Seizure And Order Of Impoundment It Obtained From This Court Pursuant To The Copyright Act As A License To Investigate And Intimidate Its Critics and This Misuse Of Its Copyrights Bars The Present Infringement Action

As this Court already has found, "the primary motivation of RTC in suing Lerma, DGS and the Post is to stifle criticism of Scientology in general and to harass its critics." November 29 Opinion at 13. In order to further its goal, RTC has twisted copyright law to serve its own purposes -- purposes that run contrary to the public policy embodied in the Copyright Act. See, e.g., id. at 13-14 (noting RTC's argument that newspapers have no right to report or quote from unpublished materials in contrary to fundamental premise of copyright law). The RTC's motives, and the conduct actuated by those motives, has now been starkly illuminated by the recently completed discovery in this action. That discovery reveals flagrant abuse by RTC of the Writ of Seizure and Order of Impoundment it obtained on the basis of its purported copyrights. Such abuse constitutes a violation of the public policy contemplated by the Copyright Act and, as such, precludes the RTC from further pursuing its copyright infringement claims against Mr. Lerma. Lasercomb, 911 F.2d at 978-79. It is an undisputed legal principle that the federal Copyright Act "does not authorize any search of any premises. . . it only authorizes 'impounding' of claimed infringing articles in the custody of the Court for eventual destruction if found after trial to infringe." Warner Bros.,

40

Inc. v. Dae Rim Trading, Inc., 677 F Supp. 740, 766 (S.D.N.Y. 1988), aff'd in relevant part, 877 F.2d 1120, 1126 (2nd Cir. 1989) ("We also agree that the 'search' conducted by [plaintiff's] agents was not authorized by 17 U.S.C. $ 503"). In other words, the public policy embodied in the portion of the Copyright Act that authorizes seizure and impoundment of allegedly infringing materials, 17 U.S.C. $503, is simply the recognition that a copyright owner is entitle to assurance that an infringing work will be destroyed after a successful trial, not hidden or transferred by the defendant. The power of the court to order seizure and impoundment is neither a warrant to take discovery, nor a license to harass. See, e.g., First Technology Safety Sys., Inc. v. Depient, 11 F.3d 641, 649 (6th Cir. 1993) (copyright statute was not intended to give copyright owner means to gather or preserve evidence in general, but only to secure allegedly infringing works); Time Warner Entertainment Co. v. Does Nos. 1-2, 876 F. Supp. 407, 412 (E.D.N.Y. 1994) (seizure order issued to copyright plaintiff must not violate Fourth Amendment). As the undisputed facts set forth at pages 9-26, supra, reveal, the RTC has improperly misused its purported copyrights to obtain a Writ of Seizure and Order of Impoundment, forms which it drafted with the broadest possible language. The RTC then employed the Writ and Order to seize, to search and to retain countless computer files belonging to Mr. Lerma that not only contained nothing even resembling a copyrighted work by L. Ron

41

Hubbard, but that do contain information about the identities, plans, and strategies of critics of Scientology, including critics whose identities were not previously known to the RTC. In part by using overbroad search terms such as "Hubbard," and largely through examining every file that appeared to be an email despite already having located the documents it alleges infringed its copyrights, the RTC used the authority of the copyright laws to obtain copies of documents relating to FACTNet's finances and plans for disseminating information, see, e.g., First Hirsh Decl. Exs. D84, D99-100, to discover the identity and strategy of a previously unknown newsgroup critical of Scientology, id. Exs. D59, D101, D102, D79, D121-23, to learn the names and background of former Scientologists, id. Ex. D76 to find out what critics of Scientology knew and were saying about the Church, see, e.g., id. Ex. D64, D3, D9, D10, D14, D23, D28, D35, D51, to learn "dirt" that RTC could use to malign these critics both in and out of Court, see e.g., Sixth Hirsh Decl. Ex A at 380-381; First Hirsh Decl. Ex, C at 2, and obtain a bully pulpit from which it has attacked the character of Mr. Lerma and anyone who agrees with his concerns about Scientology, see e.g., Sixth Hirsh Decl. Ex. P. Through all of this, the RTC has sent a chilling message to those who disagree with its doctrine and practices: Give us an excuse to sue you and we'll use it to find out about you, your friends and anyone whose security you value. Indeed, the RTC itself has bragged about its ability to do so in its own,

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apparently widely distributed, newspaper, Sixth Hirsh Decl. Ex E at 4-5.

    The RTC's decision to forgo a review of the 500 or so documents containing the five ostensibly "targeted" search terms in favor of a review of 800 files principally containing email between Mr. lerma and third parties is, standing alone, sufficient evidence of RTC's abuse of the Writ and the copyrights through which it was obtained.28/   In addition, the RTC's failure to secure those portions of its supposedly "secret" works that it found in the copy of the Fishman Declaration on Mr. Lerma's computer disks demonstrates that its "concern" over its intellectual property was a makeweight intended solely to elicit this Court's aid in obtaining what it really sought: a means to harass and silence Mr. lerma and any other critics it could identify or intimidate through litigation.

    The court in Qad recognized that a copyright owner cannot shelter behind the provisions of copyright law where its purpose runs counter to public policy. There, the plaintiff had used its copyrights to obtain a preliminary injunction that prohibited the defendant from distributing a computer program that allegedly was copied from the plaintiff's work. Qad , 770 F. Supp. at 1265. In the course of persuading the court to issue the preliminary injunction, Qad misrepresented the degree of originality of its

_______________

28/  This is especially so since, at the ex parte hearing after which the Court issued the Writ, the Court cautioned the RTC that it should not review Mr. Lerma's unrelated personal papers, including, specifically, communications with third parties. See 08/11/95 HR'f Tr at 14-15.

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own program and neglected to inform the court that it had copied much of it from a third party program. Id. at 1267-69.    Concluding that Qad had   "led th[e] Court down the garden path" to the improvident issuance of a preliminary injunction, id. at 1266 n.15, the court observed, in terms unmistakably applicable to the RTC's conduct in the present case, that Qad:

        used its copyright to sue [ the defendant] and to
        restrain it from the use of material over which
        Qad itself had no rights. That is a misuse of both
        the judicial process and the copyright laws.
        Qad sought and received an injunction, the
        result of which severely restrained [ the
        defendant]. [Qad's deception had misled this
        Court into imposing unwarranted harm on [the
        defendant] -- and with the truth now having
        emerged, it is time to correct that grievous
        wrong.

Id. at 1267. Given Qad's misuse of its copyright through the misrepresentations it made to obtain the preliminary injunction the court declared that it would "not lend aid to Qad's infringement case" and granted summary judgement in favor of the defendant. Id. at 1270-71.

    No less than Qad, the RTC has misused its copyrights to obtain relief under the Copyright Act and, in so doing, misled the Court about both its own conduct and that of Mr. lerma. Through falsely promising the court that only an independent third party would review Mr. Lerma's personal records and reassuring the court that strict limits -- or at least some limit -- wound prevent Scientologists from reviewing material that was not likely to be a copyrighted work of L. Ron Hubbard, 08/11/95 Hr'g Tr. at 13, 15; 08/25/95 Hr'g Tr. at 42-43, high-level

 

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Scientologists romped through Mr. Lerma's computer files, instructing the "independent" Mr. settle to give them copies of Mr. Lerma's email and other files involving third parties simply on the strength of the assertion that the name of the file was interesting to them, Sixth Hirsch Decl. Ex A at 377-79. Moreover, the RTC omitted from its presentation to the Court at the ex parte hearing any mention of the facts that (1) the "work" Mr. Lerma was alleged to have posted was declaration that, at the time of the hearing, was in an open court files freely available to others; (2) Mr. lerma was alleged to have posted only 64 pages of more than 700 pages of purportedly copyrighted works and (3) many of the documents Mr. Lerma was alleged to have infringed actually had been superceded and are no longer in use by RTC. See Opposition of defendant Arnaldo P. Lerma to Plaintiff's Motion for a preliminary Injunction at 21-22 & citations to the record and explanations in id. nn.8-9 (Dkt. 58); First Lerma Decl. 39-44; Fourth Hirsh Decl. Ex. 4 at 84-85.

    Quite apart from the misuse of copyright represented by the RTC's ulterior motives and wrongful conduct discussed thus far, it also had misused its copyrights by asserting control over material in which it does not even own copyright. Qad, 770 F. Supp. at 1266 (finding that plaintiff misue[d] its rightful possession of a copyright to gain control over materials for which it has not copyright") because "[n]o party can use the limited grant that a copyright confers to gain control of components over which it has no such rights," the court concluded

45

 

 

that, "[w] hen a copyright holder attempts to use legal proceedings to protect an improper extension of a copyright, the court may refuse to enforce the copyright." Id. at 1266.

In this case, the undisputed facts reveal that RTC used its purported copyrights to assert control over two distinct types of material in which it concededly does not own the copyright. First, under color of the Writ of Seizure and order of Impoundment, RTC seized, impounded 29/ and to this day retains some 121 computer files that even it admits contain absolutely no infringing materials -rather, they contain email and other private documents created by Mr. Lerma or third parties. Sixth Hirsh Decl. 3-7, 13-14. Second, RTC seized, impounded and to this day retains published works by L. Ron Hubbard the copyrights to which, RTC admits, it does not own. Id. This conduct constitutes the classic "misuse of copyright," which entitles Mr. Lerma to summary judgment in his favor as well. See Oad, 770 F. Supp. at 1266-67.

In the last analysis, the RTC's (1) lack of forthrightness in its application for the Writ, (2) its complete disregard for the limitations placed by the Court on its review of Mr. Lerma's materials and use of the Writ to obtain information about its critics, and (3) its seizure, impoundment and retention of

29/ Pursuant to various orders entered in this matter,although Mr. Lerma's counsel has access to the materials in seized files, they may not be returned to Mr. Lerma and, accordingly, he is still deprived of access to what even RTC admits is his own intellectual property or the intellectual property of third parties. See Sixth Hirsh Decl. 1 14.

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documents in which it does not have and could not claim any copyright interest, amply - and indisputably - demonstrate that RTC "led this Court down the garden path" to the improvident issuance of a writ of seizure and order of impoundment. Id. at 1266 n.15. Such conduct constitutes "a misuse of both the judicial process and the copyright laws," id. at 1267, and the appropriate remedy for "that grievous wrong" is to grant Mr. Lerma summary judgment on the RTC's infringement claims, id. at 1270-71.

B. RTC's Abuse Of The Litigation Process, A Process To

Which It Gained Access On The Basis Of Its Purported

Copyrights, Constitutes Misuse Of Its Copyrights

The law of copyright will not shelter those who engage in "misuse of [either] the judicial process [or] the copyright laws," see Oad, 770 F. Supp. at 1267, and use of litigation to harass and burden an opponent is most certainly an abuse of the judicial process. This Court has already expressed its frustration with the RTC's propensity to misuse the litigation process through the seemingly endless relitigation of settled points. See November 29 Opinion at 1-2. The RTC nevertheless continues to file motions for reconsideration, objections and appeals at every conceivable juncture, sometimes failing to bring its motions on for hearing or, if heard and granted, to take advantage of the relief the Court has given it. See supra, pp. 24-36. The interlocutory appeals from this Court's orders denying preliminary injunctive relief to RTC are a classic, if only one, example. Notwithstanding that two district court

47

judges, six circuit court judges and two Supreme Court justices have, in no uncertain terms, refused to stay such orders,' RTC recently filed 50-odd pages of briefing with the Fourth Circuit in support of its request that the court reconsider its denial of the RTC's motion for a stay. See supra, pp. 31-32. This conduct not only is consistent with RTC's past efforts to destroy its opponents through over-litigation, see Sixth Hirsh Decl. Exs. B & C, it has now had the apparently desired effect of depleting the insurance proceeds available to fund Mr. Lerma's defense, see Fourth Lerma Decl. $1 2-5.

In Washington Post Co. v. Keogh, 365 F.2d 965 (D.C. Cir. 1966), cert. denied, 385 U.S. 1011 (1967), the D.C. Circuit recognized that, unless courts are vigilant, litigants such as the RTC can misuse the litigation process to burden and harass perceived critics. In explaining the "important functions" served by summary judgment in defamation actions involving matters of public concern, the court recognized that "[c] hief among these are avoidance of long and expensive litigation productive of nothing, and curbing the danger that the threat of such litigation will be used to harass or to coerce a settlement." Id. at 968. The Supreme Court, in Time, Inc. v. Hill, 385 U.S. 374, 389 (1967), likewise recognized that the "fear of the expense involved in the [ ] defense" of insubstantial claims can cause self-censorship to the detriment of the public. See also, e.g., Reuber v. Food Chemical News, Inc., 975 F.2d 703, 715 (4th Cir.) (en banc) (citation omitted) (heightened

48

sensitivity is required where liability is predicated on speech because of "the crippling effect the casual award of damages can have upon the freedom of the press and, indeed, upon the 'free exchange of ideas, generally"), cert. denied, 501 U.S. 1212 (1991). Cf. Herbert v. Lando, 441 U.S. 153, 176-77 (1979) (courts are empowered to and should protect defendant from plaintiff's misuse of discovery); Zurcher v. Stanford Daily, 436 U.S. 547, 563-66 (1978) (court is required to prevent government from using judicial process to harass private parties).

Burdensome motions practice is not, however, the RTC's only abuse of the litigation process. It has also used this litigation as a platform for character assassination, to the point of defaming Mr. Lerma by calling him a "bigot" and a "criminal." Second Amended Complaint 1 2; Settle Decl. 1 2. And it has employed discovery to harass third parties such as Jeffrey Jacobson and Steven Fishman, and to question them for purposes other than to obtain testimony relevant to this action. See Affidavit of Duane W. Krohnke (Dkt. 227).

By using its copyrights to gain access to this Court's processes, and then using the courthouse as a staging area for harassment and character assassination, the RTC has misused its copyrights and, accordingly, has forfeited any right to press its claim. See Oad, 770 F. Supp. at 1267; Keogh, 365 F.2d at 968. 1

 

II.    THE FULLY DEVELOPED RECORD DEMONSTRATES THAT THE RTC
            HAS COMMITTED A FRAUD ON THE COURT AND, ACCORDINGLY,
            ITS COPYRIGHT INFRINGEMENT CLAIMS SHOULD BE DISMISSED

In its November 29 Opinion at 16-17, the Court noted on the basis of the record as of September 15 - that the RTC's

conduct did not appear to amount to "fraud-on the court. "30/ The

Court nonetheless found that RTC had "unclean hands" that

mandated denial of the equitable relief it was then seeking. Id.

Since that time, discovery has revealed the true extent of RTC's misrepresentation to this Court and its abuse of the Writ that this Court granted to it. Mr. Lerma respectfully submits that the record as it stands today reveals that the RTC did commit a fraud on the Court, and that the only appropriate sanction is dismissal of its copyright infringement claims.

'Fraud upon the court' . . . embrace[s] . . . that species of fraud which does or attempts to, subvert the integrity of the court itself . . . so that the judicial machinery cannot perform in the usual manner its impartial task of adjudging cases that are presented for adjudication. . . . 7 James Wm. Moore, Moore's Federal Practice, 1 60.33 (2d Ed. 1995); see also Great Coastal Express, Inc. v. International Bhd. of Teamsters, 675 F.2d 1349, 1356 (4th Cir. 1982) (quoting earlier edition of Moore's Federal Practice), cert. denied, 459 U.S. 1128 (1983)

30/ The Court raised the issue of fraud on the court sua sponte. Although Mr. Lerma successfully contended that the Church's unclean hands barred the equitable relief it sought, Mr. Lerma has not previously moved for a finding of fraud on the court.

50

"[W]hen a party deceives a court or abuses the process at a level that is utterly inconsistent with the orderly administration of justice or undermines the integrity of the process, the court has the inherent power to dismiss the action." United States v. Shaffer Equip. Co., 11 F.3d 450, 462 (4th Cir. 1993); see also Great Coastal Express, 675 F.2d at 1356-57 (fraud on the court exists where there is "a deliberate scheme to directly subvert the judicial process," and, in particular, schemes "that we cannot necessarily expect to be exposed by the normal adversary process"). Cf. National Cable Television Ass'n v. Broadcast Music, Inc., 772 F. Supp. 614, 652 (D.D.C. 1991) ("unclean hands calls for the denial of an otherwise meritorious claim where the claimant has acted so improperly as to make punishment of the claimant outweigh the defendant's unlawful conduct"). In copyright cases, dismissal is appropriate "where the copyright holder's 'transgression is of serious proportions and relates directly to the subject matter of the infringement action."' National Cable, 772 F. Supp. at 652 (citations omitted).

Before exercising its inherent power to dismiss a claim, a court should consider:

(1) the degree of the wrongdoer's culpability; (2) the extent of the client's blameworthiness if the wrongful conduct is committed by its attorney; (3) the prejudice to the judicial process and the administration of justice; (4) the prejudice to the victim; (5) the availability of other sanctions to rectify the wrong by punishing culpable persons, compensating harmed persons, and deterring similar conduct in the future; and (6) the public interest.

 

5 1

. ....

Shaffer, 11 F.3d at 462-63.

The undisputed facts before the Court demonstrate, first, that RTC failed to reveal key information to the Court when it applied ex parte for the Writ. See supra, n.12. S econd, by both omission and affirmative representation, the RTC misled this Court and Mr. Lerma into believing that only independent persons would and did review only those files on Mr. Lerma's computer disks that contained certain key words. In fact, contrary to the Court's direction, high-level Scientologists reviewed some 800 of Mr. Lerma's email and other files that did not contain any such, search terms and that were wholly unrelated to the material encompassed by the Writ. Sixth Hirsh Decl. Ex. A at 377-79.

Third, contrary to its representations to the Court, RTC permanently altered Mr. Lerma's C-drive. Sixth Hirsh Decl. Ex. A at 211-16, 313-14, 413-20 & Ex. A10 at R003081, R003289. Fourth, although it obtained the Writ by representing to the Court that the materials in question were the most sensitive of secrets, the unauthorized disclosure of which could literally cause Armageddon, once the RTC had gained access to Mr. Lerma's files, it left the "sacred scriptures" in an unlocked and unguarded room for two weeks. Sixth Hirsh Decl. Ex. A at 240-41, 297-98.

The RTC's culpability is self-evident, and its purposeful misuse of the Court's process obtained through omission and misrepresentation has directly resulted, as discussed further below, in a plain violation of Mr. Lerma's First and Fourth

96336.02 52

Amendment rights. The RTC, thus, through its own intentional conduct, has compromised the integrity of the judicial process. The prejudice to Mr. Lerma could hardly be more direct: The RTC's sins of omission and commission that led to issuance of the Writ permitted it to inflict on him one of the. most "humiliating and degrading" processes known to the law. Warner Bros. Inc. v. Dae Rim Trading, Inc., 877 F.2d 1120, 1125 (2d Cir. 1989). Given the Church's long history of abusive litigation undeterred even by large monetary sanctions imposed against it, see, e.g., Sixth Hirsh Decl. Ex. B (court in Religious Technology Center v. Scott awarded $2.9 million in attorney's fees to defendants because of RTC's bad-faith litigation tactics), it is clear that dismissal is the only sanction likely to have any meaningful effect. Ultimately, the public interest is best served by preventing further improper conduct by a litigant that has so willingly "abused the federal court system." E.g., id. Ex. B at 2.

In a series of analogous cases, courts in the District of Columbia applied the "fraud on the court" doctrine to dismiss litigation instituted by the Synanon Foundation, Inc. or Synanon Church ("Synanon"). See generally In re Sealed Case, 754 F.2d 395, 396-97 (D.C. Cir. 1985). According to the D.C. Circuit,

Synanon:

began in the 1970's to employ extreme measures to stifle media or other external scrutiny and to silence disaffected members. These measures have included lawsuits and violent attacks directed at media, former members, attorneys involved in litigation , against Synanon, or anyone else viewed as an 'enemy.'

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Id. at 397. These policies were advocated by Synanon's founder, Charles Dederich, in speeches and other directives. Synanon Church v. United States,'579 F. Supp. 967, 971.(D.D.C. 1984), aff'd, 820 F.2d 421 (D.C. Cir. 1987). Synanon's general policy of using litigation as a means to harass its critics was deemed relevant by several courts confronted with the question of whether its specific conduct constituted fraud on the court. In a succession of cases, these courts dismissed Synanon's claims as a sanction for its "'deliberately planned and carefully executed scheme to defraud.'" E.g., Synanon Church v. United States, 579 F. Supp. at 972, 974 (citation omitted) (dismissing claims as the result of plaintiff's fraud); Synanon Found., Inc. v. Bernstein, 503 A.2d 1254, 1264 (D.C. 1986) (where plaintiff fails to act fairly and without fraud or deceit as to the controversy in issue, its claim will be dismissed) (citing Mas v. Coca-Cola Co., 163 F.2d 505, 509 (4th Cir. 1947)) . 31/

Like Synanon, the Church of Scientology not only has a history of using litigation to harass its critics, it is an avowed purpose of the Church to do so. This course-of conduct is relevant to evaluating the RTC's conduct in this case. Indeed, this Court has already found that the RTC has acted in bad faith with respect to the Post, see November 28 Opinion at 11, and the

 

Synanon was found to have destroyed evidence it knew would be relevant to claims against it and to the defense of claims it had brought, preventing opposing parties from properly presenting their claims or defenses. See Sy anon Church v. United States, 579 F. Supp. 967, 972, 974 (D.D.C. 1984), aff'd, 820 F.2d 421 (D.C. Cir. 1987). RTC's abuse of the litigation process in this case, though perpetrated by different means, is no less culpable.

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RTC's conduct toward Mr. Lerma detailed herein is no less an example of bad-faith litigation.

The sanction of dismissal for a party's "flagrant bad faith" serves two purposes:

[T]he most severe in the spectrum of sanctions provided by statute or rule must be available to the district court in appropriate cases, not merely to penalize-those whose conduct may be deemed to warrant such a sanction, but to deter those who might be tempted to such conduct in the absence of such a deterrent. National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 643 (1976). Dismissal is the only sanction that will have any deterrent effect for RTC in this action, or for the Church of Scientology at large in the many actions it prosecutes against its opponents. Because its conduct constitutes a fraud on this tribunal, the copyright infringement claims against Mr. Lerma should be dismissed. National Hockey League, 427 U.S. at 643; Shaffer, 11 F.3d at 462; Synanon Found., Inc. v. Bernstein, 503 A.2d at 1264.

            III. THE FIRST AND FOURTH AMENDMENT RIGHTS THAT
                  RTC's CONDUCT IMPLICATES CAN ONLY BE VINDICATED
                  BY REFUSING TO ENTERTAIN RTC's CLAIMS

The undisputed facts of this case place it squarely within the doctrines of misuse of copyright and fraud on the court discussed in the two preceding sections. As the authorities cited therein make plain, Mr. Lerma is, without more, entitled to judgment in his favor. In this case, however, there is more at stake: This Court has already found that RTC's motive in initiating this lawsuit was to "stifle criticism of Scientology

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in general and to harass its critics," November 29 Opinion at 13, and this finding supports the conclusion that RTC has misused its copyrights and committed fraud on the court, see supra, Sections I and II. The short shrift given by RTC to Mr. Lerma's First and Fourth Amendment rights, and the adverse impact that RTC's conduct has on the public interest, can only be remedied by this Court's refusal to further entertain its claims.. 32/ 1. First Amendment concerns

The RTC contends that its motive is irrelevant to its entitlement to relief on its copyright infringement claims. RTC's Motion for Summary Judgment at 3 n.4. As a matter of constitutional law, however, RTC is wrong. In Branzburg v. Haves, 408 U.S. 665, 707-08 (1972), the Supreme Court rejected the argument that, in the ordinary case, reporters are entitled to invoke the First Amendment as a privilege against testifying before a grand jury. Nevertheless, the Supreme Court expressly recognized that prosecutors and grand juries are sometimes motivated by improper purposes, and that such circumstances "would pose wholly different issues for resolution under the First Amendment." Id. The Supreme Court noted:

official harassment of the press undertaken not for purposes of law enforcement but to disrupt a reporter's relationship with his news sources

 

32

As the Court has recognized, Mr. Lerma, no less than the Washington Post, is entitled to the full scope of First Amendment protection. See November 29 Opinion at 11 (quoting Branzburg v. Haves, 408 U.S. 665, 704 (1972) ("liberty of the press is the right of the lonely pamphleteer who uses carbon paper or a mimeograph just as much as of the large metropolitan publisher who utilizes the latest photocomposition methods")).

 

would have no justification. Grand Juries are subject to judicial control and subpoenas to motions to quash. We do not expect courts will forget that grand juries must operate within the limits of the First Amendment as well as the Fifth. Id. See also Herbert v. Lando, 441 U.S. 153, 176-77 (1979) (although First Amendment affords no privilege to news media to avoid responding to discovery, courts are empowered to and should protect defendant from misuse of discovery); id. at 180 (Powell, J., concurring) ("the District Court must ensure that the values protected by the First Amendment, though entitled to no Constitutional privilege in a case of this kind, are weighed carefully in striking a proper balance"); Zurcher v. Stanford Daily, 436 U.S. 547, 563-66 (1978) (although First Amendment provides no privilege to news media against execution of a search warrant, First Amendment does require court to prevent any effort by officials to "rummage at large in n ewspaper files" or to "intrude into or to deter" normal editorial activities of newspaper); Groslean v. American Press Co., 297 U.S. 233, 250 (1936) (while newspaper publishers may not be immune from ordinary forms of taxation, special newspaper tax in question could not be enforced because it was a "deliberate and calculated device in the guise of a tax to limit the circulation of information to which the public is entitled by virtue of the constitutional guaranties").

Thus, RTC's motive to stifle debate about Scientology through resort to the Copyright Act and the remedies it affords is not only relevant, it weighs heavily in the balance when

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considering, in light of the First Amendment, whether RTC has misused its copyrights and committed a fraud on the court. See Washington Post Co. v. Keogh, 365 F.2d at 968 (court must not permit litigation to be "used to harass. or to coerce a

settlement," especially in First Amendment context where mere threat of harassment through lawsuit may lead to self censorship). /31 As another court, confronted with a libel suit brought the Church of Scientology, recently put it: "[T] his Court finds little to distinguish silence enforced by oppressive litigation from silence coerced by law - the argument of force in its worst form."' Church of Scientology Int'l v. Time Warner, Inc., 903 F. Supp. 637, 640 (S.D.N.Y. 1995) (citation omitted)

33/ As Mr. Lerma pointed out in his Opposition to the RTC's Motion for a Preliminary Injunction, his role as a public critic of Scientology, as well as his service as a gatherer and disseminator of publicly displayed court records, lies at the core of the First Amendment. The Supreme Court has recognized that:

        in a society in which each individual has but limited
        time and resources with which to observe at first hand
        the operations of his government, he relies necessarily
        upon the press to bring to him in convenient form the
        facts of those operations. Great responsibility is
        accordingly placed upon the news media to report full
        and accurately the proceedings of government, and
        official records and documents open to the
        public.- . . . Without the information provided by the
        press, most of us and many of our representatives would
        be unable to vote intelligently or to register opinions
        on the administration of government generally. With
        respect to judicial proceedings in particular, the
        function of the press serves to bear the beneficial
        effects of public scrutiny upon the administration of justice.

 

Cox Broadcasting Corp. v. Cohn, 420 U.S. 469, 491-92 (1975) (emphasis added).

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(emphasizing First Amendment interest in preventing abusive litigation).

The First Amendment reflects our "profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open." New York Times Co. v. Sullivan, 376 U.S. 254, 270 (1964). In the context of defamation, the Supreme Court has erected strong constitutional barriers to avoid the kind of "self-censorship" that deters "would-be critics" from "voicing their criticism, even though it is believed to be true and even though it is in fact true, because of doubt whether it can be proved in court or fear of the expense of having to do so." Id. at 279. The Court has been on its guard to prevent circumvention of these barriers by efforts to suppress criticism in the garb of some alternative cause of action. See, e.g., Hustler Magazine v. Falwell, 485 U.S. 46, 52- (1988) (constitutional safeguards surrounding defamation must be applied to cause of action for intentional infliction of emotional distress "to give adequate breathing space' to the freedoms protected by the First Amendment"); Time, Inc. v. Hill, 385 U.S. 374 (1967) (same with respect to claim for "false light" invasion of privacy).

In a factual context strikingly similar to that at bar (albeit in the context of injunctive relief), the Second Circuit has likewise emphasized that "[t]he spirit of the First Amendment applies to copyright laws at least to the extent that the court should not tolerate any attempted interference with the public's

right to be informed regarding matters of general interest when anyone seeks to use the copyright statute which was designed to protect interests of quite a different nature." Rosemont Enters. v. Random House, Inc., 366 F.2d 303, 311 (2d Cir. 1966), cert. denied, 385 U.S. 1009 (1967) (Lumbard, CJ. and Hays, J., concurring). There, Howard Hughes had developed a ".scheme" to obtain the copyrights in various biographical news articles about himself and use those copyrights as a means to prevent publication of the defendant's biography of him. Id. at 311-312. Because Hughes brought suit on his copyrights "not with a desire to protect the value of the original writing but to suppress the Random House biography," two of the three members of the panel agreed that the district court properly denied the requested relief. Id. at 313.

In the same vein, the court in Oad recognized in the very context of misuse of copyright the critical interplay between the Copyright Clause of the Constitution and the First Amendment: "[J] ust as freedom of expression is the fount of copyright protection, so a copyright may not be asserted improperly to inhibit other persons, freedom of expression." Oad, 770 F. Supp. at 1265. 34/ Accordingly, RTC's effort to invoke the law of

 

34/ The RTC continues to maintain that, because its works are purportedly "unpublished" - notwithstanding that thousands of people have been granted licenses to access them - the right of first publication entitles it to prevent broader public access  to its work. However, the Supreme Court has stated clearly that " [w] e do not suggest this right not to speak would sanction  abuse of the copyright owner's monopoly as an instrument to suppress facts." Harper & Row Publishers v. Nation Enters., 471 U.S. 539, 559 (1985).

copyright to intimidate Mr. Lerma and others who give voice to critical expression about the Church of Scientology can and must be viewed against this First Amendment "backdrop," New York Times v. Sullivan, 376 U.S. at 269, a backdrop that reveals, as a matter of law, that RTC's conduct constitutes misuse of copyright and fraud on the court.

 

2. Fourth Amendment Concerns

Because RTC's efforts to suppress criticism here included the (improper) execution of a search and seizure under color of a Writ issued pursuant to the Copyright Act, its conduct must also be viewed against the backdrop of the Fourth Amendment. The Fourth Amendment's prohibition on unreasonable searches and seizures "fully applies in the civil context," Soldal v. Cook County, 113 S. Ct. 538, 546 & n.11 (1992), and seizures conducted pursuant to the Copyright Act must pass Fourth Amendment muster, Time Warner Entertainment Co. v. Does Nos. 1-2, 876 F. Supp. 407, 412 (E.D.N.Y. 1994) ; Paramount Pictures Corp. v. Doe 1, 821 F. Supp. 82, 90 (E.D.N.Y. 1993). Indeed, as Mr. Lerma observed in his Motion to Vacate the Writ of Seizure, strict observance of the Fourth Amendment in the copyright area is critical:

The proceedings upon search warrants should be strictly legal, for there is not a description of process known to the law, the execution of which is more distressing to the citizen. Perhaps there is none which excites such intense feeling in consequence of its humiliating and degrading effects.  Warner Bros. Inc. v. Dae Rim Trading, Inc., 877 F.2d 1120, 1125 (2d Cir. 1989) (ruling that seizure under Copyright statute conducted by plaintiff's "attorneys and their agents was improper").

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The Fourth Amendment rights of a defendant require special solicitude where expressive material is at issue because, as the Supreme Court has instructed: "'The Bill of Rights was fashioned against the background of knowledge that unrestricted power of search and seizure could also be an instrument for stifling liberty of expression."' Stanford v. Texas, 379 U.S. 476, 484 (1965) (citation omitted).

In this case, the RTC found the Writ of Seizure an "instrument" well suited to this very task. As the facts set forth above reveal, Scientologists (not court officers) reviewed what they chose from among Mr. Lerma's electronic correspondence, "from one end to the other." First Hirsh Decl. Ex. A at 118-19. The Fourth Amendment, however, guarantees to Mr. Lerma, no less than any other citizen, that no person acting under color of state authority "shall ransack his home and seize his books and papers under the unbridled authority of a general warrant." Stanford, 379 U.S. at 486. Where the party executing a warrant violates the Fourth Amendment, the public interest in discouraging such abuse requires that the courts prevent the party from reaping the reward of its wrongful conduct. See, e.g., Marcus v. Search Warrants of Property, 367 U.S. 717, 738 (1961) (reversing judgment upholding unconstitutional seizure "in order to vindicate appellants, constitutional rights"); Mapp v. Ohio, 367 U.S. 643, 657, 659 (1961) (requirement is essential part of Fourth Amendment and serves imperative of judicial integrity); Warner Bros. Inc. v. Dae Rim Trading Inc., 677 F. Supp. 740, 764-65 (S.D.N.Y. 1988), aff'd in relevant part, 877 F.2d 1120 (2d Cir. 1989) (Fourth Amendment requirements fully apply in copyright context).

The Fourth Amendment principles that the RTC so obviously flouted in this case should inform this Court's consideration of whether RTC has misused its copyrights and committed fraud on the court, and should compel the conclusion that RTC's conduct bars it from any further relief on the claims which formed the basis for the improper search and seizure. See United States v. Sanusi, 813 F. Supp. 149, 156 (E.D.N.Y. 1992) (while Fourth Amendment did not directly apply to private-party news organization that participated in improper search and seizure, "[t]he important constitutional principles embodied in the Fourth Amendment, however, inform the court's decision" whether to compel news organization to comply with discovery request of party injured by search notwithstanding claim of privilege).!-',

35/ The facts underlying the Sanusi case are particularly instructive. In a related opinion, the Second Circuit observed that "searches for documents" raise especially important concerns and must be conducted "'in a manner that minimizes intrusions upon privacy.'" Aveni v. Mottola, 35 F.3d 680, 688 (2d Cir. 1994) (affirming district court's denial of motion to dismiss on grounds of qualified immunity), cert. denied, 115 S. Ct. 1689 (1995). There, a search for documents related to credit card fraud "lead to the inspection of highly personal items unrelated to the purposes of the search," including business records and personal correspondence. Id. at 688 . The Second Circuit noted that "the intrusiveness of such inspection was aggravated by the fact that the needless viewing of private documents was done not only by agents conducting a search but also by unauthorized persons with no business being in the home at all." Id. In this case, the unauthorized rummaging by Scientologists through Mr. Lerma's emails and other private documents is at least as offensive under the Fourth Amendment as the conduct of the searchers in Ayeni

(continued...

 

63

Whether viewed independently or, more appropriately; in the context of the First and Fourth Amendments, RTC's motives for and conduct in this action amount to misuse of copyright and fraud on the court. Both the copyright laws and the judicial system are well-equipped to prevent the type of abuse reflected in the undisputed facts. To borrow the words of Justice White, "We do not expect courts will forget that [litigants who invoke the judicial process] must operate within the limits of the First Amendment as well as the [Fourth], Branzburg, 408 U.S. at 707-08, and a "District Court must ensure that the values [so] protected . . . are weighed carefully in striking a proper balance" between a plaintiff's right to relief and the judicial system's need to prevent abuse, Herbert v. Lando, 441 U.S. at 180 (Powell, J., concurring). Mr. Lerma requests nothing more than that the judicial process be reserved for those who bring and prosecute their claims in good faith.

CONCLUSION

For the  foregoing reasons, Mr. Lerma respectfully requests

                    (1) that the Court grant his motion for summary judgment on the basis of the affirmative defense of misuse of copyright or,

                    (2) in the alternative, dismiss the RTC's copyright infringement

 

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claims as a sanction for the fraud that RTC has perpetrated on the Court.

                                                Respectfully submitted,

                                                ROSS DIXON MASBACK L.P.

                                                By

                                                Lee Levine
                                                Jay Ward Brown
                                                (Va. Bar No. 34355)
                                                601 Pennsylvania Avenue, N.W.
                                                North Building
                                                Washington, D.C. 20004-2688
                                                 (202) 662-2000

                                                FAEGRE & BENSON, P.L.L.P.
                                                Thomas B. Kelley
                                                Natalie Hanlon-Leh
                                                2500 Republic Plaza
                                                370 17th Street
                                                Denver, Colorado 80202
                                                (303) 592-9000

                                                Duane W. Krohnke
                                                Kenneth A. Liebman
                                                2200 Norwest Center
                                                90 South Seventh Street
                                                Minneapolis, Minnesota 55402

                                                (612) 336-3000

                                                ATTORNEYS FOR DEFENDANT

                                                 ARNALDO PAGLIARINI LERMA

 

Dated: January 5, 1996

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