Part of a public library containing court papers related to lawsuits involving Scientology in some way. Collected to help lawyers and critics of Scientology in future lawsuits from or against this cult. Please report back if this has been of help, or send new contributions to the collection. Thanks. Andreas Heldal-Lund (heldal@online.no)

            CHURCH OF SCIENTOLOGY INTERNATIONAL, Plaintiff-Appellant,
                      Mitchell DANIELS, Defendant-Appellee.
                                  No. 92-1752.
                         United States Court of Appeals,
                                 Fourth Circuit.
                              Argued March 2, 1993.
                              Decided May 4, 1993.
  Church of Scientology filed defamation suit against spokesperson for drug
 company that it had targeted, along with particular drug manufacturer, for
 advertising campaign, as result of statements he was quoted as making regarding
 the church's authenticity and true purpose.  The United States District Court
 for the Eastern District of Virginia at Alexandria, Albert V. Bryan, Jr.,
 Senior District Judge, granted spokesperson's motion for summary judgment.
 Church appealed.  The Court of Appeals, Murnaghan, Circuit Judge, held that:
 (1) Church, a public figure, failed to show that the allegedly defamatory
 statements were made with actual malice, and (2) for purposes of church's
 motion to compel production by newspaper in which the allegedly defamatory
 statements were published of all materials relating to editorial board meeting
 at which the statements were alleged made, magistrate judge's ruling that
 church failed to meet the required showing of need for the privileged materials
 was not an abuse of discretion.

 In order to defeat motion for summary judgment, public figure libel plaintiff
 must present evidence to raise jury question of whether defendant
 published false and defamatory statement with actual malice;  while plaintiff
 must meet "clear and convincing" standard of proof of actual malice, court must
 draw all possible inferences in its favor.

 "Actual malice" is either knowledge of falsity or reckless disregard for the
 truth or falsity of statement.
 See publication Words and Phrases for other judicial constructions and

 Church of Scientology International, a public figure, failed to show that
 allegedly defamatory statements made by drug company spokesperson--e.g., that
 "every judge" had concluded that church was "no church" but was a "commercial
 enterprise," and that church was "organized for only one purpose, which is to
 make money"--were made with actual malice;  volume of published commentary
 reporting findings of various courts that church was not eligible for tax
 exemption, depicting some of its leaders as unscrupulous or criminal, and
 characterizing it as cult or moneymaking enterprise precluded conclusion that
 statements were made with knowledge of their falsity or reckless disregard for
 their truth or falsity.

 For purposes of defamation plaintiff's motion to compel production by newspaper
 of all materials relating to editorial board meeting, including editors' notes,
 tapes, and privileges, at which drug company spokesperson allegedly made
 defamatory statements that were quoted in newspaper the following day,
 magistrate judge could find that plaintiff failed to make required showing of
 need for discovery of the privileged materials.
  *1330 Jonathan W. Lubell, Morrison, Cohen, Singer & Weinstein, New York
 City, argued (Arlene R. Smoler, Michael L. Hertzberg, on brief), for plaintiff-
  David Alan Rudlin, Hunton & Williams, Richmond, VA, argued (Thomas G. Slater,
 Jr., R. Hewitt Pate, on brief), for defendant-appellee.

  Before ERVIN, Chief Judge, MURNAGHAN, Circuit Judge, and RESTANI, Judge,
 United States Court of International Trade, sitting by designation.

  MURNAGHAN, Circuit Judge:
  In June of 1991, the Church of Scientology International (CSI) ran a
 series of full page advertisements in USA Today Newspaper.  Several of the ads
 spoke out against the use of drugs for the treatment of mental illness and
 depression, and targeted in particular the drug Prozac and its manufacturer Eli
 Lilly & Company.  "Eli Lilly:  Purveyor of dangerous drugs," read one
 caption.  "What U.S. Drug Company Produced a Drug Named After Adolf Hitler?"
 asked another.  "How much more human misery will occur before Eli Lilly &
 Company is held accountable for the effects of its dangerous drugs?" queried a
  Shortly thereafter, CSI and Mitchell Daniels, Vice President of Eli Lilly,
 wound up in court.  Not surprisingly, the issue presented to the court involved
 the tension between the right of an individual or corporation to protect its
 reputation and the conflicting right to free speech under the First Amendment.
 The allegedly defamatory statement at issue, however, was one made not by
 Church of Scientology International, but by Mitchell Daniels.
  Daniels of Eli Lilly had responded to the USA Today advertisements run by CSI
 attacking the company by requesting an audience with the editorial board at USA
 Today.  The following day the paper quoted him as saying:
   The source of virtually everything you've heard about Prozac has come from
 the Scientologists, with a boost from trial lawyers whose self-interest is
 obvious.  One thing we want you to understand is that the Church of Scientology
 is no church.  It's a commercial enterprise.  Every judge and every
 investigative journalist who has ever looked at it has come away with that
 conclusion.  It is organized for only one purpose, which is to make money.
  *1331 CSI brought suit against Daniels in the United States District Court
 for the Eastern District of Virginia, demanding $50,000 in compensatory damages
 and $20 million in punitive damages.  It claimed that Daniels' quoted statement
 could be construed as meaning that "every judge" who had ever considered the
 question had concluded that the Church of Scientology International was "no
 church," and that such a statement was false and defamatory.  Defendant Daniels
 moved for summary judgment.  After hearing oral argument, the district court
 granted Daniels' motion from the bench on the grounds that the challenged
 statement was not defamatory as a matter of law and that plaintiff had failed
 to present evidence upon which a reasonable jury could find actual malice by
 clear and convincing evidence.  CSI has appealed.
  Appellant CSI contends on appeal that summary judgment was error because a
 jury could find that the challenged statement prejudiced CSI in the conduct of
 its religious affairs and thus was defamatory per se.  Defendant-appellee
 Daniels advances three reasons why CSI's claim of defamation per se is
 unsupported.  First, Daniels contends that his statement was not "of and
 concerning" the plaintiff.  CSI is but one member of a loosely related group of
 entities that espouse Scientology.  The statement, Daniels contends, pertained
 to the Church of Scientology as a movement and did not target CSI.  See
 Gazette, Inc. v. Harris, 229 Va. 1, 37, 325 S.E.2d 713, 738
 (1985) (plaintiff must show that the defamatory statement was intended to refer
 to him and would be so understood by persons reading it who knew him);
 Ewell v. Boutwell, 138 Va. 402, 409, 121 S.E. 912, 915 (1924) (defamatory
 statement about a large group cannot support a libel action by a member of the
 group). [FN*]

      FN* The district judge did not base his ruling on a difference between the
     exact corporate names of the person bringing suit and the one named in the

  Second, Daniels argues that the statement is not defamatory as a matter of
 law.  The defamatory meaning sued upon by CSI--"every judge has concluded that
 the Church of Scientology is no church"--is constructed only by leaving out
 significant portions of the actual quoted statement, he contends.  Daniels
 takes the position that even if the plaintiff's version of the statement is
 accepted, the statement does not contain, as it must, an "imputation that is
 'necessarily hurtful' in its effect upon plaintiff's business and [ ] affect[s]
 him in his particular trade or occupation."  Fleming v. Moore, 221 Va. 884,
 889-90, 275 S.E.2d 632, 636 (1981) (citations omitted).  Daniels points out
 that under CSI's religious practices, parishioners are required to purchase all
 services according to a fixed price schedule.  Any damages to the reputation of
 the entity, he contends, would necessarily show up in CSI's financial
 statements.  But CSI has conceded that it has suffered no actual damages.
 Accordingly, Daniels maintains, the statement could not have been "necessarily
 hurtful" to the plaintiff's trade or business.
  Finally, Daniels argues that CSI has not presented evidence upon which a
 jury could find actual malice.  CSI has admitted that it is a public figure,
 and as such, it must prove that the defendant published the defamatory
 statement with actual malice.  See New York Times Co. v. Sullivan, 376 U.S.
 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964) (constitutional guarantees require
 that a public official, in order to recover in defamation, must prove that the
 statement was a falsehood made with actual malice);  Curtis Publishing Co.
 v. Butts, 388 U.S. 130, 87 S.Ct. 1975, 18 L.Ed.2d 1094 (1967) (public figures
 as well as public officials must prove actual malice to recover for
 defamation).  Daniels contends that he based his statement on a substantial
 volume of reputable information, and that CSI's allegations of fabrication,
 purposeful avoidance of the truth, and hostility do not constitute evidence of
 actual malice (knowing falsity or reckless disregard of the truth) as defined
 and applied by the Supreme Court.
  Because the issue of actual malice is dispositive of the case, we need not
 decide the questions of whether or not the alleged statement was of and
 concerning CSI and whether or not it contained an imputation necessarily
 hurtful to the business of CSI.  For purposes *1332 of the discussion of
 actual malice, we will assume that a jury could find a defamatory meaning in
 Daniels' statement, and that a jury could find that the statement was of and
 concerning CSI.  However, we need not and do not so hold.  A decision on the
 issue of defamation as a matter of law would require an extended discussion of
 whether a reader would construe Daniels' statement as referring to CSI rather
 than to the entire Scientology movement;  whether CSI could derive the
 defamatory meaning sued upon from an edited version of the actual statement;
 whether the statement constituted protected opinion, rhetorical hyperbole, or
 fact capable of being proved true or false;  whether an organization such as
 CSI may claim defamation per se and therefore allege no actual damages;  and
 whether the statement was necessarily hurtful to CSI's religious business.
 Such a discussion would be superfluous to our resolution of CSI's claims.
  [1] In order to defeat a motion for summary judgment, a public figure libel
 plaintiff must present evidence to raise a jury question over whether a
 defendant published a false and defamatory statement with actual malice.  While
 a plaintiff must meet a "clear and convincing" standard of proof of actual
 malice, the court must draw all possible inferences in its favor.  See
 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255-56, 106 S.Ct. 2505, 2513-
 14, 91 L.Ed.2d 202 (1986).  Defendant Daniels must demonstrate the absence of
 genuine issues, but with regard to actual malice, an issue on which the
 plaintiff bears the burden of proof, he may obtain summary judgment if CSI
 fails to produce evidence.  Celotex Corp. v. Catrett, 477 U.S. 317, 322-23,
 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986).
  [2] Actual malice is defined as either knowledge of falsity or reckless
 disregard for the truth or falsity of the statement.  New York Times v.
 Sullivan, 376 U.S. at 280, 84 S.Ct. at 726.  CSI's allegation that Daniels knew
 of the falsity of his statement derives from Daniels' deposition testimony that
 he had read two published court opinions before making his comment.  CSI claims
 that neither opinion supports Daniels' statement and that they in fact directly
 refute it.  The cases, CSI claims, both recognize CSI as a religious
 institution.  Thus when Daniels said that "every judge" had found the Church of
 Scientology to be "no church," he was deliberately falsifying and concocting
 wholly untrue accusations.  See Curtis Publishing Co., 388 U.S. at 153, 87
 S.Ct. at 1990 (deliberate falsification constitutes actual malice);  Hudnall
 v. Sellner, 800 F.2d 377, 382 (4th Cir.1986) (evidence supported finding of
 actual malice where the legitimate inference drawn from testimony was that
 defendant "knowingly concocted the accusations out of whole cloth"), cert.
 denied, 479 U.S. 1069, 107 S.Ct. 960, 93 L.Ed.2d 1008 (1987).  See also
 Zerangue v. TSP Newspapers, Inc., 814 F.2d 1066, 1071 (5th Cir.1987) (when
 acknowledged source of a defamatory statement does not contain the information
 supposedly derived from it, reckless fabrication can be inferred).
  CSI's charge that Daniels had knowledge of the falsity of his statement
 because he had read two court opinions does not stand up under scrutiny of
 those opinions.  The opinions are susceptible to more than one interpretation
 as to whether they concluded that the Church of Scientology was a "church"--
 within the meaning of Daniels' statement--or indeed whether they addressed that
 question at all.  In each case, the issue before the court was whether the
 Church of Scientology of California conformed to the requirements for tax
 exempt status under I.R.S. Code s 501.  In both cases the courts noted that
 they accepted the Church's contention that it was organized as a religious
 institution.  See Church of Scientology v. Commissioner, 83 T.C. 381, 385
 (1984) ("the parties have stipulated that petitioner was organized exclusively
 for religious purposes....  The Court adopts this stipulation and finds that
 petitioner was organized to propagate the faith of Scientology, a religion
 founded by L. Ron Hubbard");  Church of Scientology v. Commissioner, 823
 F.2d 1310, 1315 (9th Cir.1987) ("Neither the [Tax] Commissioner, nor the Tax
 Court, nor this court questions that the Church of Scientology of California
 was organized for a bona fide religious purpose.")  Nevertheless, the Tax Court
 upheld the Tax *1333 Commissioner's determination of tax deficiencies and
 late filing penalties against the Church of Scientology of California.  The
 Court held that the Church did not qualify for tax exempt status under
 ss 501(a) and 501(c)(3) because it was operated for a substantial
 commercial purpose, its earnings inured to the benefit of its founder, and it
 violated well-defined standards of public policy.
  On appeal, the Ninth Circuit addressed the Church's expressed concern that the
 Tax Court had failed to recognize it as a bona fide religion.  Under the
 applicable subsection, the court explained, an organization, in order to be
 exempt, must show that it is both organized and operated exclusively for
 religious or charitable purposes.  The fact that the entity was organized for a
 religious purpose did not end the inquiry.  The court went on to uphold the
 revocation of tax exempt status claimed by the Church on the basis that the
 entity did not operate exclusively for religious or charitable purposes since
 part of its net earnings inured to the benefit of private individuals.
 Church of Scientology, 823 F.2d at 1315.
  A conclusion, based upon those two opinions, that courts had determined that
 the Church of Scientology was "no church" is perhaps, in legal terms, not
 wholly accurate.  However, CSI's assertion that these two opinions definitively
 refute Daniels' statement and show that courts have determined that CSI is
 indeed a bona fide "church," is an equally imprecise conclusion.  We point out
 first that the cases do not involve the Church of Scientology International,
 but rather the Church of Scientology of California (CSC).  Second, church
 status was not involved.  The opinions merely decided that, although CSC had
 been organized for religious purposes, it did not operate exclusively for
 religious purposes.  A reading of the two judicial opinions, then, fairly
 permits the conclusion that the courts decided that CSC was a church as well as
 the conclusion that it was not.  While both statements are, speaking in
 absolute precision, arguably incorrect, neither rises to the level of
 deliberate falsification.  Some slight inaccuracy when describing the
 background of a case does not equate to deliberate misrepresentation or knowing
  CSI has emphasized, however, that Daniels, who is a lawyer, stated
 affirmatively that he had knowledge of what "every judge" who had ever looked
 at the matter had concluded, when in fact he had read only two court opinions
 dealing with the religiosity of the Church of Scientology.  Numerous other
 opinions, according to CSI, have recognized Scientology as a religion.  CSI has
 asserted that Daniels made a broad statement without exhaustively researching
 the subject.  His failure to inform himself before making the accusation
 constituted purposeful avoidance of the truth.  Purposeful avoidance of the
 truth, CSI maintains, has been found evidence of a reckless disregard for the
 truth, and should be so found here.  See Harte-Hanks Communications, Inc. v.
 Connaughton, 491 U.S. 657, 692, 109 S.Ct. 2678, 2698, 105 L.Ed.2d 562 (1989).
  Daniels testified that before meeting with the editorial board of USA Today
 and making his statement, he had read, in addition to the two court cases,
 numerous articles about Scientology published in magazines and newspapers.  The
 articles he reviewed and supplied for the record--some of which received awards
 for journalistic excellence--came from a wide variety of reputable publications
 and comprised an impressive collection of research about Scientology.  The
 articles detailed criminal convictions of a number of the Church's leaders for
 extortion, forgery, breaking into government offices, bugging the IRS building,
 and planting Scientology agents in drug-control and intelligence agencies of
 the government.  They reported accusations of mind control by ex-churchmembers
 and members' families, and chronicled the story of an ex-member who sued the
 organization--and was awarded $30 million--for mental anguish suffered while a
 member.  They discussed the exorbitant rates charged by the Church to its
 members in exchange for services, "auditing," and training courses designed to
 facilitate the spiritual quest.  The articles related the transformation of the
 organization from a "precision science," to a form of psychotherapy, to a
 religion, a transformation variously described as "expedient," "skillful
 propaganda," and "a sweeping and sophisticated campaign *1334 to gain new
 influence."  Many of the articles quoted court opinions.  Virtually all of the
 articles mentioned the lengthy legal battle that the Church of Scientology of
 California engaged in when it claimed tax-exempt status, the same battle that
 resulted in the two court opinions previously discussed.  The revocation of
 tax-exempt status was a recognition on the part of the courts, several of these
 articles reported, that the Church of Scientology had "made a business out of
 selling religion."  See, e.g., The Scientology Story:  Shoring Up its Religious
 Profile, Los Angeles Times, June 25, 1990 (quoting Church of Scientology, 83
 T.C. 381 (1984)).
  The issue before us is not whether the Church of Scientology is a legitimate
 church or whether its image, beliefs, and behavior conform to a mainstream
 perception of what a church should be.  We need not decide whether the court
 cases revoking the Church's tax-exempt status deny or confer any judicial
 sanction upon the organization, nor whether the articles that accuse the Church
 of nefarious motivations are fair or are merely evidence of "a running dog
 press" and the "forces of evil," as Scientology's former leader Ron Hubbard
 once stated.  Courts have no authority to determine what is or is not a
 religion, and no legal formula by which to measure the truth or philosophical
 acceptability of an entity's spiritual beliefs.  See United States v.
 Seeger, 380 U.S. 163, 185, 85 S.Ct. 850, 863-64, 13 L.Ed.2d 733 (1965) (the
 proper judicial task is limited to determining if a claimant's belief's "are
 sincerely held and whether they are, in his own scheme of things,
 religious");  United States v. Lee, 455 U.S. 252, 257, 102 S.Ct. 1051, 1055,
 71 L.Ed.2d 127 (1982) (courts may not evaluate religious truth).  Likewise,
 journalists--even reputable or prizewinning ones--are not the final arbiters of
 what constitutes a church and do not always write the gospel truth.  Thus, we
 do not quote the court opinions and articles as evidence of the truth or
 falsity of Daniels' statement.  Rather, we review them as support for Daniels'
 lack of reckless disregard for the truth or falsity of his statement.
  What constitutes reckless disregard for the truth or falsity of a
 statement, the Supreme Court noted in St. Amant v. Thompson, 390 U.S. 727,
 88 S.Ct. 1323, 20 L.Ed.2d 262 (1968), "cannot be fully encompassed in one
 infallible definition."  Id. at 730, 88 S.Ct. at 1325.  However, a public
 figure plaintiff faces a significant burden in proving actual malice.  The
 Supreme Court has made it clear that a "defendant must have made the false
 publication with a high degree of awareness of ... probable falsity."
 Harte-Hanks Communications, 491 U.S. at 667, 109 S.Ct. at 2685-86 (quoting
 Garrison v. Louisiana, 379 U.S. 64, 74, 85 S.Ct. 209, 215-16, 13 L.Ed.2d
 125 (1964)).  "[R]eckless conduct is not measured by whether a reasonably
 prudent man would have published, or would have investigated before
 publishing.  There must be sufficient evidence to permit the conclusion that
 the defendant in fact entertained serious doubts as to the truth of his
 publication."  St. Amant, 390 U.S. at 731, 88 S.Ct. at 1325-26 (1968).  In
 Reuber v. Food Chemical News, Inc., 925 F.2d 703 (4th Cir.1991) (en banc ),
 we thoroughly discussed the standard of reckless disregard for the truth, and
 stressed the Harte-Hanks requirement that the plaintiff must show that the
 defendant acted with a high degree of awareness of probable falsity.  Reuber
 made it clear that actual malice cannot be established merely by showing a
 departure from accepted journalistic or professional practices.  The case
 emphasized that the failure to investigate, "where there was no reason to doubt
 the accuracy of the sources used ... cannot amount to reckless conduct."
 Id. at 716.
  [3] Given the volume of published commentary on the Church of Scientology
 reporting the findings of various courts that the Church was not eligible for
 tax exemption, depicting some of the organization's leaders as unscrupulous or
 criminal, characterizing the entity as a cult or a money making enterprise,
 portraying its endeavor to style itself as a religion as misleading and
 opportunistic--in short, describing the organization in terms that are at odds
 with a common understanding of what a "church" is--it is impossible to conclude
 that Daniels entertained serious doubts as to the truth of his statement or
 spoke with a high degree of probable falsity.  His failure to read every court
 case involving the Church of Scientology *1335 does not constitute
 purposeful avoidance of the truth.  See St. Amant, 390 U.S. at 733, 88 S.Ct.
 at 1326-27 (1968) (reliance on an unverified affidavit and failure to take
 steps to investigate did not constitute actual malice where the publisher
 entertained no serious doubts as to truth of the publication).  Moreover, the
 fact that Daniels couched his statement in terms of what "every judge" had
 found is not indicative of actual malice.  See Greenbelt Cooperative
 Publishing Ass'n. v. Bresler, 398 U.S. 6, 13-14, 90 S.Ct. 1537, 1541-42, 26
 L.Ed.2d 6 (1970) (literal inaccuracy in a colloquial or hyperbolic statement is
 not actionable);  Ryan v. Brooks, 634 F.2d 726, 733 (4th
 Cir.1980) (incorrect interpretation of a report or use of stronger language
 than the source itself used is not proof of actual malice).  Finally, CSI's
 claim that it produced evidence to show that Daniels bore ill will toward CSI
 does not help its claim.  See Hotchner v. Castillo-Puche, 551 F.2d 910, 914
 (2nd Cir.1977) (ill will or hostility, by itself, does not prove actual
 malice), cert. denied sub nom. Hotchner v. Doubleday & Co., Inc., 434 U.S.
 834, 98 S.Ct. 120, 54 L.Ed.2d 95 (1977).  Accordingly, we hold that CSI has not
 presented evidence upon which a jury could find, by clear and convincing
 evidence, that Daniels' statement, if defamatory, was made with actual malice.
  [4] CSI makes an additional complaint that the Magistrate Judge erred
 in denying it the ability to obtain discovery material from USA Today.
 Although CSI failed to object to the status of discovery as part of its
 opposition to summary judgment, it filed a motion to compel production by USA
 Today of all materials relating to the June editorial board meeting, including
 editors' notes, tapes, and draft articles.
  The Magistrate Judge ruled that CSI failed to make the required showing for a
 need for the privileged materials, a ruling that is reviewable only for abuse
 of discretion.  See La Rouche v. National Broadcasting Co., 780 F.2d 1134,
 1139 (4th Cir.), cert. denied, 479 U.S. 818, 107 S.Ct. 79, 93 L.Ed.2d 34
 (1986) (in determining whether a journalist's privilege will protect the
 source, a court must balance whether information is relevant, can be obtained
 by other means and whether there is a compelling interest in the information;
 determination is committed to the discretion of the district court).  Nothing
 in the record shows that there was an abuse of discretion in the denial of
 discovery of the materials.  In fact, the consideration that Daniels offered to
 stipulate to the accuracy of the quotation that appeared in USA Today makes the
 relevance of the materials CSI seeks questionable, rather than critical to the
 case, as the law requires.  See id. 780 F.2d at 1139 (the fact that the
 plaintiff already knew the names of sources made need for information less than
 compelling).  Although Daniels has stated that he does not recall the exact
 wording of the statement at the editorial board meeting, the statement being
 sued upon is that which ran in the paper--not that which was made to the
 board.  Moreover, the Magistrate Judge correctly observed that CSI had made no
 effort to pursue alternative sources of information concerning the meeting.  In
 short, the Magistrate Judge did not err in refusing to permit additional
 discovery of privileged material from USA Today.
  The judgment is accordingly

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