FOUNDING CHURCH OF SCIENTOLOGY OF WASHINGTON, D.C., INC., Appellant,
v.
William H. WEBSTER, Director of the Federal Bureau of Investigation of the
United States, et al.
No. 85-5885.
United States Court of Appeals,
District of Columbia Circuit.
Argued June 3, 1986.
Decided Sept. 26, 1986.
Religious organization sued the Federal Bureau of Investigation, alleging that
it was victim of extensive campaign of government harassment. The United
States District Court, District of Columbia, entered order dismissing action,
and organization appealed. The Court of Appeals, Starr, Circuit Judge, held
that founder and spiritual leader of organization, who continued to retain
authority over its administrative and ecclesiastical affairs even after he
resigned as executive director, qualified as de facto "managing agent," so that
his failure to appear at deposition could result in dismissal of organization's
suit.
Affirmed.
See also, D.C., 104 F.R.D. 459.
[1] FEDERAL CIVIL PROCEDURE
Whether individual qualifies as "managing agent" of corporation, so that his
failure to appear at deposition may result in dismissal of corporation's suit,
must be decided case by case based on character of his control over
corporation, degree to which his interest and interests of corporation
converge, and extent to which his testimony will be helpful in fact-finding on
matter at issue, in comparison to that of others associated with corporation.
Fed.Rules Civ.Proc.Rule 37, 28 U.S.C.A.
[2] FEDERAL CIVIL PROCEDURE
Founder and spiritual leader of religious organization, who continued to retain
authority over its administrative and ecclesiastical affairs even after he
resigned as executive director, qualified as de facto "managing agent," so that
his failure to appear at deposition could result in dismissal of suit commenced
by corporation. Fed.Rules Civ.Proc.Rule 37, 28 U.S.C.A.
[3] FEDERAL COURTS
"Abuse of discretion" standard calls on appellate court, in spirit of humility
occasioned by not having participated in what has gone before, not just to
scrutinize conclusion but to examine with care and respect process that led up
to conclusion.
[4] FEDERAL CIVIL PROCEDURE
Dismissal of religious organization's suit against government was not abuse of
discretion, where managing agent of corporation who was probably best informed
about matters at issue failed to appear at deposition despite ample advance
notice and warning as to consequences.
*1448 **54 Appeal from the United States District Court for the District
of Columbia (Civil Action No. 78-0107).
*1449 **55 Anthony P. Bisceglie, Washington, D.C., with whom William C.
Walsh and Jeffrey B. O'Toole were on the brief, for appellant.
Freddi Lipstein, Atty., Dept. of Justice, Washington, D.C., with whom Richard
K. Willard, Asst. Atty. Gen., Dept. of Justice, Joseph E. diGenova, U.S. Atty.,
and Barbara L. Herwig, Atty., Dept. of Justice, were on the brief, for
appellees. Anthony J. Steinmeyer and E. Roy Hawkens, Attys., Dept. of Justice,
also entered appearances for appellees.
Regina Jackson, Washington, D.C., was on the brief for amici curiae, American
Coalition of Unregistered Churches, et al., urging reversal.
Before GINSBURG, STARR, and SILBERMAN, Circuit Judges.
Opinion for the Court filed by Circuit Judge STARR.
STARR, Circuit Judge:
The appeal before us marks the end of eight years of litigation in a case that
has never passed beyond the stage of pre-trial discovery. The District Court
dismissed the case as a sanction under Fed.R.Civ.P. 37 for failure to comply
with a discovery order entered by the court. Specifically, L. Ron Hubbard, the
founder of the Church of Scientology, failed to appear for a court-ordered
deposition to inquire into his status as a managing agent of that
organization. We are satisfied that the District Court acted lawfully within
its authority and sound discretion. We therefore affirm.
I
In 1978, the Founding Church of Scientology of Washington, D.C.
("Scientology") filed suit on behalf of itself and a class composed of all
"Churches" and "Missions" of Scientology in the United States. In its
complaint, Scientology named the United States and numerous federal officials
as defendants. [FN1] The complaint alleged an extensive campaign of government
harassment that included illegal investigative and law enforcement activities,
collection and dissemination of information about Scientology and other related
organizations, and encouragement of hostility toward the movement inside and
outside the federal government.
FN1. The other defendants, named in their official capacities, were the
Director of the Federal Bureau of Investigation, the Attorney General of
the United States, the Director of the Central Intelligence Agency, the
Secretary of the Treasury, the Chief of the United States National Central
Bureau of the International Criminal Police Organization, the Director of
the National Security Agency, the Secretary of the Army and the Postmaster
General. For convenience sake, the various defendants-appellees will
frequently be referred to in our discussion as "the Government."
By virtue of this alleged unlawful activity, Scientology asserted violations
of the First, Fourth and Ninth Amendments to the Constitution. It sought
compensatory and punitive damages under the Federal Tort Claims Act; a
declaratory judgment that the defendants' actions had violated the Constitution
and laws of the United States; an injunction against further law enforcement
activities by defendants directed at the various Scientology "Churches" and
their members; and further injunctive relief to expunge or destroy false and
derogatory information allegedly collected and obtained illegally by defendants
and placed in government records.
In an initial opinion and order dated October 19, 1978, the District Court
dismissed the damage claims for failure to exhaust administrative remedies
under the Federal Tort Claims Act, and the claim for injunctive relief from
asserted religiously based discrimination on the grounds that plaintiff had not
pursued the exclusive remedy available under Title VII of the Civil Rights Act
of 1964. The trial court allowed the remainder of the suit to proceed and
conditionally certified a class of all Scientology Churches and Missions for
purposes of seeking declaratory and injunctive relief.
Subsequent developments in the case followed on the heels of a criminal
prosecution, United States v. Mary Sue Hubbard, Crim. No. 78-401, slip op.
(D.D.C. order *1450 **56 enforcing plea agreement Oct. 8, 1979), brought
against nine high ranking officials of the Church of Scientology. In that
case, several defendants stipulated that the network of Scientology
organizations had conducted a broad campaign against U.S. Government entities
and officials, particularly the Internal Revenue Service. [FN2] This concerted
campaign by the Scientology apparatus encompassed a wide range of illegal
activities, including theft of government documents for use in litigation
against the United States, falsification of government identification cards,
wiretapping, infiltration and perjury.
FN2. See Stipulation of Evidence filed Jan. 7, 1980 as Exhibit 1 to
Memorandum of Facts and Activities in support of Defendants' Motion for
Leave to Answer.
On the basis of this new evidence, the defendants in the present case sought
to amend their answer to the complaint in order to interpose a defense of
"unclean hands." The United States Magistrate, in a decision affirmed by the
District Court, permitted the defense to be raised and discovery to be
conducted without deciding whether such a defense should in fact be applied in
this case. We pause to observe that "unclean hands" as a defense went to the
injunctive remedy, but not to the request for declaratory relief. As will be
seen, however, the defendants contend on appeal that the discovery they sought
extended beyond this defense to provide a general, substantive defense to the
claims asserted in this suit. [FN3]
FN3. The undisputed evidence of a campaign of criminal activity by the
Church, the appellees argue, in fact justified the intensive law
enforcement activities that the complaint attacked. See Transcript of Oral
Argument, June 3, 1986, at 18-28.
On August 21, 1984, as part of a series of discovery requests, the Government
noticed the deposition of L. Ron Hubbard, the founder of the Church of
Scientology, in his capacity as "an officer, director, or managing agent of
plaintiffs." Joint Appendix ("J.A.") at 163. When Hubbard failed to appear
for the deposition on the designated date, defendants moved to dismiss the suit
or, in the alternative, to compel Hubbard's deposition. The court responded by
ordering defendants to renotice the deposition and to submit a factual proffer
as to why Hubbard's deposition was necessary. J.A. at 262. The court stated
that if Hubbard did not appear, the Government could then renew its alternative
motion to compel his deposition or dismiss the case. The defendants submitted
the requested factual proffer and renoticed the deposition. Hubbard again
failed to appear on the appointed date. In the wake of this turn of events,
plaintiffs submitted numerous declarations by officials of the individual
Scientology churches and high officials in the central Scientology organization
denying not only Hubbard's status as managing agent but any capability of
contacting him. J.A. at 271-350. The Government responded with additional
declarations and other evidence in support of Hubbard's status as managing
agent. J.A. at 351-407.
In an order issued March 13, 1985, the District Court found that the
Government had established "at least a prima facie case" that Hubbard was
managing agent as of November 19, 1984. To settle this issue conclusively, the
court ordered Hubbard to appear on April 5, 1985, for a limited-purpose
deposition addressed to "the issue of his relationship to the organization."
J.A. at 429. No inquiry could be made into the facts pertaining to the merits
of the suit. Failure to appear, the court expressly warned, would result in
dismissal of the suit altogether. Id. Submitting several additional
declarations by Church employees and officials, plaintiff moved for
reconsideration. J.A. at 431-72. This the court denied. J.A. at 475. On
April 9, 1985, upon notification by counsel that Hubbard had failed to appear
for the limited-purpose deposition as scheduled, the court dismissed the case
with prejudice. J.A. at 488. On July 10, the court denied the plaintiff's
motion to vacate the judgment of dismissal. Scientology then filed this
appeal.
*1451 **57 II
The ultimate question for resolution is whether the District Court abused its
discretion when it dismissed this suit as a discovery sanction under
Fed.R.Civ.P. 37. Before we reach that issue, however, we must first
determine whether the District Court properly resolved the underlying question
whether the Government had shown, at least prima facie, that Hubbard was a
managing agent of Scientology and could therefore be compelled to testify on
its behalf.
A
Fed.R.Civ.P. 26(a) broadly authorizes parties to obtain discovery by
various means, the first of which is "depositions upon oral examination."
Depositions thus rank high in the hierarchy of pre-trial, truth-finding
mechanisms. That is not surprising. Face-to-face confrontations prior to
trial, with such indicia of formality as administration of the oath, the
presence of counsel and stenographic recording of the proceedings, are a
critical component of the tools of justice in civil litigation.
Fed.R.Civ.P. 30(a) thus broadly provides that "any party may take the
testimony of any person, including a party, by deposition upon oral
examination." Fed.R.Civ.P. 32(a)(2), governing the use of depositions in
court proceedings, provides that the deposition "of anyone who at the time of
taking the deposition was an officer, director, or managing agent ... may be
used by an adverse party for any purpose." (Emphasis added.) At the same
time, Fed.R.Civ.P. 37(d) authorizes dismissal and other sanctions "[i]f a
party or an officer, director or managing agent of a party ... fails ... to
appear before the officer who is to take his deposition, after being served
with a proper notice." (Emphasis added.) The concept of "managing agent" is
thus an integral part of the corpus of discovery law. See also Fed.R.Civ.P.
30(b)(6).
Federal discovery provisions have traditionally provided a mechanism for an
adverse party to secure depositions from a public or private corporation
through a managing agent designated by the adverse party. In 1970, an
amendment to the Federal Rules of Civil Procedure replaced a specific
authorization for securing depositions of managing agents with the current,
more general framework, and established a new mechanism permitting the
corporation (or other entity) itself to designate managing agents to sit for
depositions, see Fed.R.Civ.P. 30(b)(6). When the entity itself makes the
designation, subsequent disputes over the adverse party's use of the
deposition "for any purpose" are avoided. See Fed.R.Civ.P. 30, Advisory
Comm. Note to Subdivision (b)(6), at 92 (1986). However, the language
authorizing the new procedure expressly stated that it "does not preclude
taking a deposition by any other procedure authorized in these rules."
Fed.R.Civ.P. 30(b)(6). The Advisory Committee Note accompanying the Rule
made clear that the new procedure does not supplant but "supplements the
existing practice whereby the examining party designates the corporate official
to be deposed." The former procedure, long known to the bar, thus remains
available for litigants to employ if they see fit. See Atlantic Cape
Fisheries v. Hartford Fire Insurance Co., 509 F.2d 577, 578-79 (1st Cir.1975);
8 C. Wright, A. Miller, Federal Practice and Procedure s 2103, at 373-74
(1970). It was under this traditional procedure that the Government sought to
depose Hubbard.
B
[1] We pause at this stage of our analysis to observe that there is no
doubt, and appellant indeed has not sought to dispute, that Scientology
qualifies under the broad category of organizations which can be deposed
through an adverse party's designation of a managing agent. Regardless of
whether Scientology is a religious organization, a for-profit private
enterprise, or something far more extraordinary--an intriguing question that
this suit does not call upon us to examine--the entities to which the managing-
agent concept can be applied include all manner of public and
*1452 **58 private corporations and associations, non-profit and
otherwise. See 4A J. Moore, Moore's Federal Practice P 30.51, at 30-41 (2d ed.
1984).
The law concerning who may properly be designated as a managing agent is
sketchy. [FN4] Largely because of the vast variety of factual circumstances to
which the concept must be applied, the standard, like so many others in the
law, remains a functional one to be determined largely on a case-by-case
basis. See Petition of Manor Investment Co., 43 F.R.D. 299, 300
(S.D.N.Y.1967); Kolb v. A.H. Bull Steamship Co., 31 F.R.D. 252, 254
(S.D.N.Y.1962). Nearly all the published cases relating to the issue are from
the district courts, and nearly all of those decisions concern whether an
employee of a corporation should be designated a managing agent. 4A J. Moore,
supra, P 30.55, at 30-72 n. 15. Only rarely have courts even had occasion
to examine whether a de facto relationship with a corporation, rather than a de
jure one, furnishes a basis in law for designating a managing agent. See,
e.g., Petition of Manor Investment Co., supra; Independent Productions
Corp. v. Loew's, Inc., 24 F.R.D. 19 (S.D.N.Y.1959).
FN4. In at least one instance, the burden of proof to establish managing-
agent status has been placed on the party seeking discovery. See
Proseus v. Anchor Line, Ltd., 26 F.R.D. 165, 167 (S.D.N.Y.1960). Since
the ultimate decision whether a deposition qualifies as a statement by a
managing agent must be made by the trial court in applying Fed.R.Civ.P.
32(a)(2), courts in pretrial proceedings have resolved doubts under the
standard in favor of the examining party. See Atlantic Coast Insulating
Co. v. United States, 34 F.R.D. 450 (E.D.N.Y.1964); United States v.
The Dorothy McAllister, 24 F.R.D. 316, 318 (S.D.N.Y.1959); Rubin v.
General Tire & Rubber Co., 18 F.R.D. 51, 56 (S.D.N.Y.1955); Curry v.
States Marine Corp., 16 F.R.D. 376, 377 (S.D.N.Y.1954); 4A J. Moore,
supra, at P 30.55(1); C. Wright, A. Miller, supra, s 2103, at 376.
In the Manor Investment case, the individual designated as a managing agent
was not shown to hold any office or formal position in the corporation. He
did, however, control its affairs, performing functions "of a supervisory
nature" related to the activities in question. More generally, the individual
exercised "supreme" authority within the corporation. Id. at 301. In
addition to having practical control of the firm's destiny, the individual
owned all the stock in the enterprise. In concluding that the individual was
indeed a "managing agent" of the enterprise, Judge Weinfeld found "such unity
of interest between [the company] and [the owner], that it may be referred to
as his 'alter ego.' " Id. The learned judge thus drew on the familiar
doctrine of law permitting courts, where the result would otherwise be unjust
or inequitable, to pierce the corporate veil, [FN5] a veil that ordinarily
shields investors from liability for contractual obligations or tortious acts
by the corporation and that protects the corporation from being bound by the
independent acts of investors. See Labadie Coal Co. v. Black, 672 F.2d 92,
96-100 (D.C.Cir.1982). See generally Wormser, The Disregard of the Corporate
Fiction and Allied Corporate Problems (1927); Hamilton, The Corporate
Entity, 49 Tex.L.Rev. 979 (1971); Berle, The Theory of the Enterprise
Entity, 47 Colum.L.Rev. 342-43 (1947); Latty, Disregarding the Corporate
Entity as a Solvent of Legal Problems, 34 Mich.L.Rev. 597 (1936). Under the
alter ego theory, the court may ignore the existence of the corporate form
whenever an individual so dominates an organization "as in reality to negate
its separate personality." Quinn v. Butz, 510 F.2d 743, 758
(D.C.Cir.1975). The test is a practical one, focusing on how active and
substantial the individual's control is. Valley Finance, Inc. v. United
States, 629 F.2d 162, 172 (D.C.Cir.1980).
FN5. "[T]he fiction of corporate entity may be and should be disregarded
in the interests of and to promote justice in such cases as fraud,
violation of law or contract, public wrong, or to work out the equities
among members of the corporation internally and not involving rights of the
public or third persons." Fletcher Cyclopedia Corporations s 25, at 305;
see also W. Cary & M.E. Eisenberg, Cases and Materials on Corporations 80-
103 (5th ed. 1980).
For the purpose of determining whether an individual is a "managing agent"
within the meaning of the discovery rules, the *1453 **59 alter ego theory
provides a useful analogy. As in the arena of corporate liability, the focus
begins with the character of the individual's control. In addition, we can
profitably examine both the degree to which the interests of the individual and
the corporation converge, and how helpful the individual will be in fact-
finding on the matter at issue, in comparison to others associated with the
corporation. As in all matters appertaining to discovery, it is the ends of
justice that are to be served. See Fed.R.Civ.P. 1 (the Federal Rules "shall
be construed to secure the just, speedy, and inexpensive determination of every
action").
C
[2] L. Ron Hubbard resigned from his official position as Executive Director
of Scientology Churches in 1966, after serving for more than a decade. He
continued thereafter in the ostensibly nominal position of "Founder." The
Government offered abundant evidence in the District Court, however, that
Hubbard played a uniquely prominent role within Scientology and various
affiliated organizations from 1966 until the early 1980's. As founder of
Scientology and the sole source of its scriptures, Hubbard enjoyed authority
difficult for the founder and owner of a garden-variety private business to
attain. Private, secular concerns may advance beyond the vision of its
founder; new talents may need to be secured as the cycles of the
organization's development unfold. It is not at all an unfamiliar situation
for the entrepreneur--the visionary--to find inhospitable the administration of
the vast enterprise spawned by his experimentation in the laboratory or
workshop. But an organization claiming to be a religion that is built upon the
word of a single individual venerated by the flock of the faithful is, it
scarcely needs to be said, a rather different sort of entity. It is not
disputed that, in the spiritual or ecclesiastical matters asserted to be the
high mission of Scientology organizations, the word of L. Ron Hubbard has
remained unquestioned.
From evidence adduced below, Hubbard appears to have maintained control in
administrative matters through high positions in such entities as the Sea
Organization, "an elite fraternity of Scientologists." Church of
Scientology of California v. Comm'r, 83 T.C. 381, 389 (1984). [FN6] Indeed,
uncontested declarations before the District Court leave little doubt about
either the ecclesiastical or administrative dimensions of Hubbard's authority
during the period from 1966 to 1982. The declarations of Diana Sue Reisdor-
Voegeding and John Nelson, associates of Hubbard until 1982, describe the
mechanisms by which Hubbard controlled operations of Scientology and its
related organizations, passed on orders to subordinates, and sought to avoid
prosecution for his ties to the Church. J.A. at 395-403. Beyond these
declarations specifically cited by the District Court (J.A. at 429), the
Government submitted other declarations bearing on the question of Hubbard's
control. Laurel Sullivan, an officer in the Scientology organizations from
1973 to 1981, asserted that public pronouncements to the effect that Hubbard
had at that time disassociated himself from the *1454 **60 Scientology
organizations were "completely untrue," and that he in fact issued orders that
were immediately obeyed. J.A. at 208. Kima Douglas, who worked at the Church
from 1968 through 1980, declared that Hubbard exercised "complete control over
the entire (Church) organization." J.A. at 216. Gerald Armstrong, another
associate, told of a 1980 meeting to make plans to conceal Hubbard's
acknowledged control over "all aspects of" the Church of Scientology of
California. J.A. at 222. The Tax Court decision to which we just alluded, in
denying the California Church of Scientology tax-exempt status for the years
1970, 1971 and 1972, set forth detailed findings about Hubbard's relation to
that organization along with the numerous other Scientology organizations.
Church of Scientology v. Comm'r, supra. The Tax Court harbored no doubt
that Hubbard "kept control over" the policies, actions, and even the finances
of the California Church. Id. at 389; [FN7] see also n. 6, supra.
FN6. The Tax Court found that although Hubbard had officially resigned
from his position as Executive Director of Scientology in 1966, he remained
in the "top position." Through the Hubbard Communications Office Policy
Letters, he controlled the basic administrative policy of the California
Church, the "Mother Church" of all Churches of Scientology in the United
States, 81 T.C. at 389, 401. Through various types of policy directives,
including "Flag Orders," "L. Ron Hubbard Executive Directives," and "Orders
of the Day," Hubbard directed operations in Scientology's subsidiary
organizations. Id. at 389.
Hubbard also retained control over Scientology's financial affairs. He was
a signatory on all Scientology bank accounts. His approval was required
for all financial planning. He was the sole trustee of a major Scientology
fund. He controlled Operation Transport Corp., Ltd., a sham corporation
which purportedly performed banking services for "Flag," Scientology's
administrative center. Id. at 389, 399, 400.
Further, Hubbard supervised "auditing," the process through which
Scientologists help an individual gain "spiritual competence." He also
continued to develop Scientology doctrine, id. at 385, 389, as our
subsequent discussion in the text will show.
FN7. To be sure, the findings by various courts which have found
themselves immersed in Scientology-related litigation have not been
entirely uniform in this respect. See Church of Scientology of
California & Founding Churches of Scientology of Washington, D.C. v.
Siegelman, No. 79 Civ. 1166 (S.D.N.Y. order dated Oct. 27, 1980)
("absence of any official connection" to Churches on the basis of evidence
before the court prohibits compulsion of Hubbard as a witness), J.A. at
271-73.
Beyond the overall dominance that he exercised over the Scientology
organizations during this earlier period, Hubbard was closely linked to, if not
in charge of, the activities for which appellees initially sought his
deposition. The primary evidence about these activities emerges from the
criminal prosecution in which seven members of the church, including Hubbard's
wife, were found guilty of conspiracy to obstruct justice. In that trial, one
defendant was found guilty of conspiring illegally to obtain government
documents, and another was found guilty of theft of government property. See
United States v. Hubbard, 650 F.2d 293, 301 (D.C.Cir.1980). In a
Stipulation of Evidence submitted in that case, the defendants recounted a
full-fledged campaign mounted by the Church of Scientology and its affiliated
organizations against the United States Government, particularly the Internal
Revenue Service. See Stipulation of Evidence, supra. The conspiracy,
involving all levels of the Church hierarchy, encompassed theft of government
documents for use in litigation against the United States, falsification of
government identification cards, wiretapping, infiltration and perjury. See
id. The Stipulation indicated that Hubbard "was, by virtue of his role as
the founder and leader of Scientology, overall supervisor of the Guardian's
Office," a Scientology entity which carried out these illicit activities.
Id. at 7. Indeed, the grand jury named Hubbard as an unindicted co-
conspirator in that case. Those indicted and convicted included not only
Hubbard's wife, who "as the second person in the hierarchy of Scientology, had
duties which included supervision of the Guardian's Office," id. at 8, but
several other officials occupying high posts in the Scientology hierarchy.
The criminal case does not stand alone. The Tax Court decision to which we
previously referred denied the Church tax exempt status in part because of this
conspiracy by the Scientology organizations, "beginning in 1969 and continuing
at least until July 7, 1977." Church of Scientology of California v.
Comm'r, supra, 83 T.C. at 505. Finding that the Church of Scientology of
California "filed false tax returns, burglarized IRS offices, stole IRS
documents, and harassed, delayed, and obstructed IRS agents who tried to audit
the Church's records," id., the Tax Court held that the California Church
had violated public policy and thereby lost entitlement to any exemption which
it might otherwise have enjoyed. 83 T.C. at 506-09.
Abundant evidence supports the proposition that Hubbard continued in his de
facto position as head of the Church. [FN8] Based on *1455 **61 the
evidence in the record, the District Court rightly concluded that Hubbard was
in a position to provide information about the conspiracy on behalf of the
Scientology organizations for this purpose.
FN8. We observe that other courts have reached inconsistent results in
related cases concerning the managing-agent status of Hubbard in more
recent years. Three decisions, relying on many of the same declarations
and documentary evidence presented in this case, found that Hubbard could
be deposed as a managing agent. Church of Scientology of California v.
Armstrong, No. C420153 (Cal.Super.Ct. July 20, 1984), J.A. at 165-93;
Church of Scientology of California v. Flynn, No. CV 83-5052R (C.D.Cal.
Mar. 20, 1985) (finding Hubbard a managing agent through March 4, 1985),
Supplemental Appendix ("S.A.") at 729-30; Church of Scientology Int'l
v. Elmira Mission of the Church of Scientology, No. CV 85-412T (W.D.N.Y.
order dated Nov. 26, 1985), J.A. at 732-49. A fourth court, upholding the
finding of a United States Magistrate, concluded that Hubbard could not be
considered a managing agent for purposes of Fed.R.Civ.P. 30 after
December 9, 1983. Religious Technology Center v. Scott, No. CV 85-711-MRP
(C.D.Cal. order dated Jan. 24, 1986), J.A. at 773-75; see also n. 4,
supra.
D
To designate Hubbard as, at least prima facie, a managing agent, the District
Court had to find it probable that he remained a managing agent for the
Scientology organizations at the time his deposition was sought.
Fed.R.Civ.P. 32(a)(2). 4A J. Moore, supra, P 32.04. For the first
scheduled deposition, Hubbard must have been, prima facie, managing agent as of
November 1984; for the second, as of April 1985. Faced with overwhelming
evidence of Hubbard's continuing control over Scientology as of 1982,
appellants have sought to raise doubt whether Hubbard remained as managing
agent after that time and specifically at the critical, later dates of the
aborted depositions. First, they emphasize that the declarants upon whose
statements the Government relies held no positions in Scientology
organizations after 1982. Second, Scientology submitted numerous statements by
its high officials to the effect that Hubbard had engaged in communications
with Scientology's official organs only intermittently since 1982 and that he
had not communicated with the Scientology apparatus since May 1984. See, e.g.,
Declaration of Marc Yager, J.A. at 437-39; Declaration of Guillaume Lesevre,
J.A. at 446-47. Third, Scientology points to indications of organizational
rearrangements around 1981-82, when Hubbard hired a law firm and a professional
management agency separate from the Scientology network to handle his personal
affairs. See Declaration of Lyman Spurlock, J.A. at 457-58; Declaration of
Lawrence E. Heller, J.A. at 461-64.
The narrow question to be explored is whether the District Court erred in
holding it probable that Hubbard continued to exercise the authority of a
managing agent for Scientology insofar as he retained authority to determine
whether to govern authoritatively in either administrative or ecclesiastical
affairs. As noted above, Hubbard's role as managing agent up to approximately
1982 is well established in the record. A "general principle" in the law of
evidence in such matters is that "a prior or subsequent existence is evidential
of a later or earlier one." 2 Wigmore on Evidence s 437, at 514 (emphasis
in original). [FN9] In addition, the declarations of the church officials
themselves, while denying Hubbard's role, [FN10] in fact implicitly confirmed
that Hubbard, even after 1982, remained free at all relevant times to
communicate to them whatever and whenever he wanted. Indeed, the two times
they agree that he did communicate with the entire Scientology apparatus, in
December 1983 and January 1984, Scientology dutifully issued his
*1456 **62 statements to its members, [FN11] exactly as if he remained in
his undisputed position of authority. Lesevre Declaration at J.A. 446; Yager
Declaration at J.A. 438-39. As the District Court concluded, it appears
without question that had Hubbard attempted to reassert his authority in other
ways, Scientology officials would have accepted that exercise of dominion over
the flock. So far as we can discern, the record reveals no evidence that
Hubbard intended to end his relationship with Scientology, but only that he
wanted, in his unfettered discretion, to determine whether and how to continue
that relationship. Ultimate control, we have no doubt, he possessed until his
death. [FN12]
FN9. We recognize that a presumption of continuity in time may not hold as
an absolute rule for relations of authority, see 9 Wigmore on Evidence s
2530 (Chadbourn ed. 1981). "[T]he rulings merely declare that certain
facts are admissible, or that they are sufficient evidence for the jury's
finding ... on such issues...." Id. (citations omitted).
FN10. It cannot go unnoticed that these declarations were provided by
individuals who owe their allegiance to an organization whose officials in
the past have employed a number of devices, including deception and
falsification, to achieve the organization's goals. But needless to say,
we are not in a position to weigh the veracity of the numerous declarants
whose statements came before the District Court.
FN11. Rons Journal 38, as the later communication was known, took the form
of a tape recording distributed to local Scientology Churches and
Missions. See Transcript, transcribed December 18, 1984, J.A. at 355-93.
In this message, apparently recorded on New Year's Day 1984, Hubbard
reported that he was making available "the first accurate briefing I have
had on scientology organizations in several years." J.A. at 356. The
transcript suggests the way he continued to exercise such authority that
amounted to control. He noted that he had not "[f]or a very long while ...
been connected" with the "demanding area" of "active management of the
Church or associated organizations." Id. Yet, as the reason for this
separation, Hubbard contended that he needed time to "complete my
researches and write them up for you," id., an apparent reference to his
pursuit of refinements in Scientology doctrine. See also J.A. at 391-
92 (announcing "new discoveries"). In the bulk of the 37-page transcript,
Hubbard recounted in great detail the latest changes in the Scientology
organizations, with comprehensive statistics about the state of finances,
the growth of the organization, and efforts by "new executives" in the
organization to "rebuild global scientology in every division and sector,
get it back on policy and in tech" after an alleged attempt by "power crazy
people" to take over the organization. J.A. at 357-58. In this
communication, Hubbard alluded to "Rev. 352," or L.R.H. Ed. 352, J.A. at
358-59. In this statement from December 1983, Hubbard "gave an inkling" of
the recent changes in the organization that Rons Journal 38 described in
detail.
FN12. On January 27, 1986, over nine months after dismissal of this suit
in the trial court, the Church announced that L. Ron Hubbard had died on
January 24, 1986. See J.A. at 718 (citing account in Washington Post). As
the parties have implicitly recognized, Hubbard's passing has no bearing on
the questions before us. We remain obligated to decide the appeal on the
basis of the record before the District Court.
The continued, undisputed possibility that Hubbard might unilaterally reassert
his authority provided adequate justification for the trial court's holding.
Courts have accorded managing agent status to individuals who no longer
exercised authority over the actions in question (and even to individuals who
no longer held any position of authority in a corporation), so long as those
individuals retained some role in the corporation or at least maintained
interests consonant with rather than adverse to its interests. See, e.g.,
Independent Productions Corp. v. Loew's, Inc., supra; Fay v. United
States, 22 F.R.D. 28, 31-32 (E.D.N.Y.1958); Curry v. States Marine Corp.,
supra, 16 F.R.D. 377. But see Proseus v. Anchor Lines, Ltd., supra, 26
F.R.D. 165.
But we are satisfied that the District Court's holding in this respect rests
on even stronger ground. Hubbard continued through 1984 not only as the
potential leader of the Scientology organization but as the actual leader.
Even as Hubbard may have sought to distance himself, for whatever reason, from
administrative details and to separate his personal business affairs from the
Scientology apparatus, the evidence before the District Court demonstrated that
Hubbard retained preeminence as spiritual or ecclesiastical head of
Scientology. The basic structure of belief for Scientology dictates that no
one can replace him in this role. [FN13] In this essential sense,
*1457 **63 Scientology remained his alter ego despite the passive role he
sought to assume. In an organization which claims to derive its purpose from
Hubbard's writings and sayings, the role that Hubbard continued to play in
Scientology affairs could scarcely be viewed in law or in practical judgment
as a figure of lesser status than that of managing agent.
FN13. We are informed, without contradiction, that Scientologists
uniformly agree that the writings of Hubbard comprise the sole source of
their scriptures, a status equivalent to Judeo-Christian Scriptures. See
Declaration of Heber Jentzsch, J.A. at 279; Yager Declaration, J.A. at
435-36; Lesevre Declaration, J.A. at 444; Church of Scientology,
Scientology: A World Religion Emerges in the Space Age 52-55, District
Court Exhibit 4(a)-A. As Rons Journal 38 suggests, Hubbard viewed even his
most recent "new discoveries" as authoritative truth to be passed on as
church doctrine. J.A. at 391-92. The great detail in which Hubbard
recounted in Rons Journal 38 the status of the church organization and its
membership also suggests that despite the declarations of Church officials,
Hubbard's role after 1982 may have encompassed at least some sort of
advisory authority over the organization; the communications about
"dissemination and delivery of Scientology religious services," Lesevre
Declaration at J.A. 446; Yager Declaration at J.A. 438, which the
declarants have not submitted for the record or described in detail,
suggests the same.
E
We recognize that the District Court's definition of "managing agent" imposed
a greater burden on Hubbard if he truly wished to disassociate himself from the
Scientology organization that might obtain for, say, the founder of a business
enterprise. Yet, Hubbard's status--as founder and spiritual leader of a
movement that lays claim to the status of a religion--presents a unique
situation in the application of traditional legal doctrines governing the
relationship of individuals to organizations or associations with which they
are or have been affiliated. While an entrepreneur might simply terminate all
connections to the enterprise that he or she had founded, Hubbard's teachings
catapulted him to the epicenter of Scientology attention and activity. During
his lifetime, Hubbard remained an object of allegiance and veneration even if
he did not maintain regular communication with the organizational vessel.
Under these unusual circumstances, we have no hesitation in upholding the
District Court's finding that the Government had shown, prima facie, Hubbard's
status as managing agent of Scientology at the pertinent times.
III
[3] The question remains whether the trial court properly dismissed this
suit under Fed.R.Civ.P. 37(b)(2) by virtue of Hubbard's failure to appear at
the April 1985 deposition. As in other cases of dismissal imposed as a
sanction, the applicable standard of review confines appellate inquiry to
whether the District Court abused its discretion. See National Hockey
League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 642, 96 S.Ct. 2778,
2780, 49 L.Ed.2d 747 (1976) (per curiam); Aruba Bonaire Curacao Trust Co.
v. C.I.R., 777 F.2d 38, 44 & n. 7 (D.C.Cir.1985) (dismissing suit under
"analogous" Tax Court Rule 104); Weisberg v. Webster, 749 F.2d 864, 870
(D.C.Cir.1984) (dismissing suit under Rule 37); Automated Datatron, Inc.
v. Woodcock, 659 F.2d 1168, 1169 (D.C.Cir.1981) (dismissing counterclaim under
Fed.R.Civ.P. 41(b)). That is, needless to say, a rule of appellate
restraint, a principle faithful to the reality that appellate tribunals cannot
hope to have the entire range of considerations as readily at hand as the court
charged with the case in the first instance. We rightly pay great deference,
as the abuse-of-discretion standard itself suggests, to the District Court's
determination in such instances. Implicit in that governing standard is the
recognition that the trial court has a better "feel," as it were, for the
litigation and the remedial actions most appropriate under the circumstances
presented. The Court of Appeals enters the fray only at the end of what may
well be--and indeed was here--a lengthy process that moved step-by-step toward
the disposition that prompts the challenge on appeal. The abuse-of-discretion
standard calls on the appellate department, in a spirit of humility occasioned
by not having participated in what has gone before, not just to scrutinize the
conclusion but to examine with care and respect the process that led up to it.
A
[4] The pertinent text of Rule 37 provides that when "a party or an
officer, director, or managing agent of a party ... fails ... to appear before
the officer who is to take his deposition, after being served with proper
notice ... the court in which *1458 **64 the action is pending on motion
may make such orders in regard to the failure as are just," including
"dismissing the action or proceeding or any part thereof." Rule 37(b)(2),
(b)(2)(C).
In reviewing dismissals under Fed.R.Civ.P. 37 and the closely analogous
Tax Court Rule 104, we have consistently applied the rule of Societe
Internationale v. Rogers, 357 U.S. 197, 212, 78 S.Ct. 1087, 1095, 2 L.Ed.2d
1255 (1958), requiring that the dismissal be based on "willfulness, bad faith,
or ... fault" on the part of the plaintiff. See Aruba Bonaire Curacao Trust
Co. v. C.I.R., supra, 777 F.2d at 45; Weisberg v. Webster, supra, 749 F.2d
at 871. While such a finding remains a prerequisite to imposition of the
dismissal sanction, it is by no means the sole consideration relevant to the
determination whether to dismiss the case. As the Supreme Court has observed,
a court does well to consider the deterrent effect a sanction will have on
parties and potential parties in other cases who might otherwise contemplate
abusive actions. See National Hockey League, supra; see also Shea v.
Donohoe Construction Co., 795 F.2d 1071, 1077 (D.C.Cir.1986); Aruba
Bonaire, supra, 777 F.2d at 44; Weisberg, supra, 749 F.2d at 870-71.
Especially in cases of delay to the orderly progression of the litigation
process, the fundamental concern of avoiding the squandering of scarce judicial
resources (and the resources of other litigants) in an era of overcrowded
dockets and untoward delays in getting cases decided is highly germane to
whether a District Court should dismiss a case. See Donohoe Construction
Co., supra, at 1075-76; Automated Datatron, Inc., supra, 659 F.2d 1168.
In review of past dismissals under Fed.R.Civ.P. 37 and Tax Court Rule
104, this court has had little trouble in finding the requisite bad faith or
fault where the party has failed to respond to interrogatories, see Weisberg
v. Webster, supra, or failed to appear at depositions without an attempt at
explanation, see Aruba Bonaire, supra. Here, despite the protestations of
Scientology that it could not contact Hubbard, the District Court took
Hubbard's absence at the April deposition to "supply the requisite 'element of
willfulness or conscious disregard' for the discovery process which justifies
the sanction of dismissal" (citing Dellums v. Powell, 566 F.2d 231, 235
(D.C.Cir.1977)), J.A. at 475. In our view, this treatment comported with the
status of managing agent that the District Court properly attributed, prima
facie, to Hubbard. Since Scientology remained Hubbard's alter ego, notice
to the organization could reasonably be construed as notice to him; in
consequence, the Church itself, as the party for which Hubbard was, prima
facie, the managing agent, could be sanctioned for his failure to appear when
ample advance notice was given of the importance of the deposition and the
consequence that would attach from failure to attend to it. [FN14]
FN14. We are thus not confronted with a sudden or precipitous action by
the District Court, but to the contrary a carefully calibrated course of
action designed to further the progress of prolonged litigation. Nor are
we faced with a situation where an innocent client may have suffered by
virtue of the actions or omissions of an attorney. See, e.g., Shea v.
Donohoe Constr. Co., supra; Butler v. Pearson, 636 F.2d 526
(D.C.Cir.1980); Jackson v. Washington Monthly Co., 569 F.2d 119
(D.C.Cir.1977).
The District Court also had ample reason to interpret the failure of Hubbard
to abide by its order as evidence of "willfulness, bad faith or ... fault."
Societe Internationale, supra, 357 U.S. at 212, 78 S.Ct. at 1096. Appellees
presented substantial evidence tha the arrangement by which Hubbard could
communicate with the Church only at his initiative was in fact designed to
shield Hubbard from legal process. See Declaration of Gerald Armstrong, J.A.
222; Declaration of Diana Sue Reisdorf-Voegeding, J.A. 396-98; Declaration of
John Nelson, J.A. 202-03; see also documents at J.A. 22, 32-36, 237-40.
Coupled with representations by Church officials about their inability to
contact Hubbard, this evidence could reasonably be interpreted by the District
Court as indicating that Hubbard and the Church had structured their
relationship *1459 **65 to frustrate the orderly process of discovery
proceedings.
B
Dismissal, as we have had occasion to note, is "an extremely harsh
sanction." Trakas v. Quality Brands, Inc., 759 F.2d 185, 186
(D.C.Cir.1985). Dismissal before trial is, in many circumstances, "to be taken
only after unfruitful resort to lesser sanctions." Jackson v. Washington
Monthly Co., 569 F.2d 119, 123 (D.C.Cir.1977). The District Court nonetheless
enjoys authority to impose this sanction even where "a less drastic sanction
might have been entertained," Automated Datatron, Inc., supra, 659 F.2d at
1169. But in our view, it is unnecessary to embark upon a lengthy inquiry into
possible alternative sanctions under the circumstances here. No monetary or
other sanction imposed on Scientology held out any realistic promise of
overcoming the barrier Hubbard had chosen to erect between himself and the
Church. Nor would dismissal of a part of the suit or of the pleadings
suffice. The conspiracy the appellees alleged goes beyond the "unclean hands"
defense as initially advanced in the District Court; rather, the far-reaching
conspiracy as alleged by the Government goes to the very essence of this
lawsuit, providing, if true, the basis for law enforcement activities that
Scientology has attacked as illegal. [FN15] See n. 3, supra.
FN15. Prior resort to lesser remedies is not in any event required
regardless of the circumstances presented. Here, a clear order of the
court was issued only after the party seeking discovery had been put to the
test of demonstrating a need for the deposition. We emphasize the
importance in our review of the care and deliberativeness evidenced by the
District Court in moving to invoke a sanction, expressly authorized by the
Rules, only after a crystal clear warning of the sanction to be imposed had
been provided.
To be sure, had defendants been able to secure the information they sought
from a source other than Hubbard, the sanction of dismissal would have been
less clearly appropriate. But that condition did not obtain here. Based upon
the record before us, we agree with the District Court's conclusion that
Hubbard himself was "uniquely situated to provide information" relevant to the
actions of Scientology against the Government. J.A. at 475. We do well to
remember that for most of the era--in the period up to 1978--with which this
lawsuit is concerned, there can be no reasonable doubt that Hubbard was
Scientology's managing agent. So long as this was the case, Hubbard was the
one individual likely to be best informed about the role that the conspiracy
(as chronicled in the documents from United States v. Mary Sue Hubbard)
played in the Scientology organization. Under those circumstances, his
deposition was of critical importance. His failure to comply with a clear
directive of the District Court, an order accompanied by an express threat of
dismissal, warranted the sanction imposed by the District Judge in the exercise
of her sound discretion.
Affirmed.