UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA RTC, .et al. ) NO. CV 85-711 JMI (BX) ) CV 85-7197 JMI (BX) Plaintiffs, ) ) vs. ) ) ROBIN SCOTT, et al., ) MEMORANDUM OPINION ) AND ORDER Defendants. ) ----------------------------) RTC, et al. ) ) Plaintiffs, ) ) vs. ) ) LARRY WOLLERSHEIM, ) ) Defendants. ) ---------------------------- AND RELATED COUNTER-CLAIMS ) ---------------------------- MEMORANDUM OPINION I. PROCEDURAL HISTORY This motion revives the issue of pretrial determination of the issue of authorship of certain Scientoloqy scriptures called NOTs. Plaintiffs previously moved for summary judgment as to the authorship of NOTs based upon the argument that the First Amendment prohibits judicial interference with the ecclesiastical determination that L. Ron Hubbard ("Hubbard") is the author. The Special Master rejected this argument and denied the motion. See Order dated November 20, 1990. Plaintiffs have now moved pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment as to the authorship of NOTs based upon a statutory argument. They assert that the "work made for hire" doctrine, as codified by the Copyright Act of 1976 ("the Act"), necessarily imputes authorship of NOTs to Hubbard whether he or Mayo actually created the materials. Defendants have opposed the motion and have cross- motioned for dismissal of the instant motion and the imposition of sanctions, invoking Rules 56(f) and 11 respectively. See Fed. R. Civ. P. 56 and 11. The thrust of defendants' opposition is that Mayo was not an employee of Hubbard. The cross-motions seek sanctions against plaintiffs for various alleged abuses of the litigation process. II. DISCUSSION A. WORK MADE FOR HIRE Given the issue sanction of the previous order, it is an established fact the Mayo substantially participated in the drafting of NOTs. Plaintiffs' characterization of Mayo as a "mere scrivener" cannot be a basis for this or any other motion in this litigation. Thus, in order to prevail on this motion, plaintiffs must establish as a matter of law that Mayo is not the author of NOTs notwithstanding his substantial participation. Ordinarily, the creator of a written work is its author. However, the Copyright Act of 1976 treats "works made for hire" differently. If the written work is a work made for hire, "the employer or other person for whom the work was prepared is considered the author". 17 U.S.C. section 201(a). This means that if Mayo's contribution to NOTs is work made for hire, someone other than Mayo is the author and a grant of summary judgment is in order. The next step of the analysis is to determine whether or not Mayo's contribution to NOTs is a work made for hire. Section 101 of the Act defines work made for hire as follows: (1) a work prepared by an employee within the scope of his or her employment; or (2) a work specially ordered or commissioned for use as a contribution to a collective work, as part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a test, as answer material for a test, or as an atlas, if the parties expressly agreed~ in a written instrument signed by them that the work shall be considered a work made for hire. Plaintiffs do not seriously claim that Mayo's contribution satisfies the terms of section 101(2). Quite clearly, it does not. There is no written agreement establishing Mayo's contribution as a work made for hire. The dispositive inquiry in this case therefore is whether his contribution is "a work prepared by an employee within the scope of his employment" under section 101(1). Plaintiffs' moving papers inject ambiguity into an otherwise straightforward analysis of work made for hire. Plaintiffs tender uncontroverted facts which establish that the Church of Scientology of California ("CSC") hired Mayo in some capacity to perform work under the supervision of Hubbard. See Plaintiffs' Statement of Uncontroverted Facts and Conclusions of Law. The argument which flows naturally from these facts is that CSC is an employer and thus is the author of the work created by its employee Mayo. Plaintiffs, however, argue that Hubbard somewhow becomes the employer because he supervised CSC's employee. This is bizarre. As evident from its label, work made for hire requires a hiring relationship between the two parties. Plaintiffs have certainly not established that Hubbard hired Mayo in any capacity, and their own statement of uncontroverted facts appears to refute this. Hubbard clearly is not a potential employer under the work made for hire doctrine. CSC is the only arguable employer under work made for hire.1/ Whether or not Mayo's contribution is a work made for hire, however, focuses on the status of Mayo, not the "hiring party". The Special Master must evaluate Mayo's relationship with the hiring party and decide if Mayo should be classified as an employee or an independent contractor. See, Community For Creative Non-violence v. Reid, __ U.S. __, 109 S.Ct. 2166 (1989). If Mayo was an employee, then his contribution is a work made for hire under section 101(1). If he was an independent contractor, it is not. Id. The decision to classify a hired party as either an employee or an independent contractor must be made in light of the general common law of agency. *Reid*, 109 S.Ct. at 2173. Under general agency law, the most important consideration appears to be "the hiring party's right to control the manner and means by which the product is to be accomplished". Id. at 2178. Other relevant considerations are: "the skill required; the source of the instrumentalities or tools; the location of the work; the duration of the relationship between the parties; whether the hiring party ------------ 1, In their reply memorandum, plaintiffs invoke the the so- called borrowed servant doctrine in support of their assertion that Hubbard enjoys employer-author status notwithstanding the absence of uncontroverted facts establishing a hiring relationship between Hubbard and Mayo. However, assuming arguendo that the doctrine applied to copyright, it would never come into play unless the oringinal hiring person was first deemed to be an employer-author. Therefore, the Special Master first addresses whether or not CSC is an employer-author. ----------------------- has the right to assign additional projects to the hired party; the extent of the hired party's discretion over when and how long to work; the method of payment; the hired party's role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the third party." Id. Each of these factors is addressed seriatim below. 1. The Hiring Party's Control Over the Manner and Means by Which the Product is to be Accomplished CSC had no direct control of the manner and means by which NOTs was accomplished; however, it would be artificial to say that it did not have substantial indirect control over the creation of NOTs. The whole project was designed to meet the specifications and needs of the Church of Scientology (of which CSC is a part). NOTs is based on Mayo's auditing of Hubbard. Auditing is a Church practice. Hubbard was the founder of the Church. The Church literally follows everything Hubbard said; therefore, as a practical matter, Hubbard's suggestions and criticism regarding the earlier drafts of NOTS would be adopted verbatim by CSC had it sought to directly control its hired party. Moreover, as reflected in the excerpted transcripts of the tepes, Hubbard actually exercised his right to control by making suggestions and criticisms. As such, the first Reid factor favors a finding of an employer-employee relationship. 2. Skill Required The skills required to assists Hubbard in preparing NOTs was obviously learned only through years of exposure to Scientology doctrine and procedures. Employees generally acquire their job-skills from long-time employement, while independent contractors are expected to have already mastered their Skills prior to employment. Thus, this factor favors finding that Mayo was an employee. 3. Source of Instrumentalities and Tools Defendants do not dispute that CSC provided Mayo with all the instrumentalities and tools needed to work on NOTs. Employers generally provide their employees with instrumentalities and tools needed to complete their work. Independent contractors, on the other hand, are expected to have the basic instrumentalities and tools needed to ply their trade. As such, this factor favors finding that Mayo was an employee. 4. Location of the Work While it is unclear whether CSC or Hubbard himself provided the various workplaces where NOTs was created, it is uncontroverted that Mayo never provided the workplaces. An independent contractor generally has his own workplace. This is another factor which supports finding that Mayo was an employee. 5. The Duration of the Relationship Between the Parties Mayo had a long-standing relationship with Scientology in general and CSC in particular. Employer-employee relationships generally continue for relatively long periods of time, while hiring person-independent contractor relationships are intermittent. As such, this factor strongly favors finding that Mayo was an employee. 6. Whether the Hiring Party Has the Right to Assign Additional Projects to the Hired Party An employee is expected to perform whatever tasks his employer assigns him. An independent contractor is hired to perform only a particular task. During his years with CSC, Mayo occupied several different positions and performed several different functions. This factor favors finding that Mayo was an employee. 7. The Extent of the Hired Party's Discretion Over When and How Long to Work Employers dictate when and how long their employees will work, independent contractors enjoy complete independence over their schedules. Mayo had no such independence while connected with CSC. This factor strongly favors finding that Mayo was an employee. 8. The Method of Payment The uncontroverted evidence is that CSC provided Mayo with room and board, plus a paltry wage. In the Special Master's view, this situation is not representative of either a modern employer-employee relationship or a hiring person-independent contractor relationship. Nevertheless, the situation does appear more akin to an employer-employee relationship in that Mayo's sole source of income was CSC. An independent contractor generally looks to several different souces of income for his livelihood. As such, this factor marginally favors finding that Mayo was a~ employee. 9. The Hired Party's Role in Hiring and Paving Assistants Employers generally decide whether an employee needs an assistant and, if so, pay the assistant. Independent contractors make such decisions themselves and bear the costs. Here, the assistants were all CSC employees. It is unclear whether Mayo had a role in hiring or paying these assistants. However, even if Mayo had some role, it is not akin to an independent contractor who pays his own assistants. Given Mayo's extremely small income, it is inconceivable that he could pay any assistants. 10. Whether the Work is Part of the Regular Business of the Hiring Party Employers hire employees to carry out their regular business or functions. Independent contractors are hired to perform special services outside the hiring party regular business or functions. It cannot be denied that the creation of religious scripture was a part of the regular function of CSC while Hubbard was alive. Mayo's work certainly falls within that function. This factor favors finding that Mayo was an employee. 11. Whether the Hiring Party is in Business Plaintiffs themselves state that CSC is not in business. However, a hiring party certainly need not be in business to have empoyees. This factor is ambiguous and does not support or oppose finding that Mayo was an employee. 12. The Provision of Emp1oyee Benefits Employers generally provide full-times employees with some "employee benefits", i.e., medical insurance, sick leave, etc. Hiring persons do not provide benefits to independent contractors. The Special Master has seen no evidence that CSC provided employee benefits within the ordinary meaning of the term. Indeed, plaintiffs' uncharacteristic silence with respect to benefits suggests none were provided. As such, this factor weighs against finding that Mayo was an employee. 13. The Tax Treatment of the Hiring Party Employees have witholding tax taken from their paychecks. Independent contractors are paid in full and are responsible for their own tax payments. It is uncontroverted that Mayo had witholding tax taken from his paychecks from CSC. This factor favors finding that Mayo was an employee. The Reid factors, considered as a whole in conjunction with the uncontroverted facts, definitely favor a determination that Mayo was an employee of CSC acting within the scope of his employment when he drafted NOTs. Thus, Mayo's substantial contribution to NOTs constitutes work made for hire under section 101(1). Having found that CSC qualifies as an employer-author, the Special Master now must address plaintiffs' argument that Hubbard may stand in the shoes of CSC under the so-called borrowed servant doctrine. Under this tort law doctrine, when an employer loans his employee to a second employer, the latter stands in the shoes of the former for the purposes of employee negligence liability. See Denton v. Yazoc & M.V.R. Co., 284 U.S. 305, 308, 52 S.Ct. 141, 142, 76 L.Ed. 310 (1931); Parker V. Joe Julan Enterprises. Inc., 848 F.2d 118, 119 (9th Cir. 1988). Plaintiffs assert the same rationale should apply for the purposes of establishing employer authorship under work made for hire. This novel invocation of the borrowed servant doctrine must fail for two reasons. First, the doctrine evolved to advance certain policy concerns uniquely applicable to tort law. In that area of the law, the courts have generally adopted expansive, flexible interpretations of "employer-employee" to fix liability on the person best able to bear a financial loss; the borrowed servant doctrine advances this interest in that it creates liability for a party with "deep pockets" (the second employer) which otherwise might escape liability under general agencey principles. However, in the context of copyright law, the doctrine would serve no legitimate purpose. In fact, the doctrine would actually frustrate the central goal of copyright law, which is to encourage creativity by rewarding the actual authors. See *Copyright, Independent Contractors, the Work For Hire Doctrine: Community for Creative Non-violence V. Reid*, 67 North Carolina Law Review 994' 1008 (1989) (arguing that agency principles as applied to tort law are often inapplicable and inappropriate in determining copyright issues). Moreover, the suggested use of the borrowed servant doctrine in the copyright context would essentially nullify the. definintive test set forth in Reid. The Special Master has already determined that under the Reid factors Mayo was not an employee of Hubbard. Applying the borrowed servant doctrine, Mayo would somehow be converted to Hubbard's employee despite these factors, leaving Reid wholy nugatory. The Special Master rejects the notion that Reid means nothing and therefore holds that the borrowed servant doctrine does not apply to copyright. B. SANCTIONS Defendants' cross-motions for dismissal and sanctions pursuant Rules 56(f) and 11 of the Federal Rules of Civil Procedure are more easily analyzed than the motion for summary judgment. Defendants argue that the instant motion should be dismissed as a sanction against plaintiffs for their failure to produce ordered discovery regarding the authorship of NOTs. See Opposition at 20. The Special Master has already imposed a severe issue sanction against plaintiffs for their noncompliance. It would be unfair to sanction plaintiffs again for the same conduct. As such, the motion for dismissal should be denied. Defendants have also moved for monetary sanctions because they assert plaintiffs are filing frivolous, repetitive motions for summary judgment in order to burden defendants with excessive costs incurred in opposing these lotions. Under Rule 11, a motion is sanctionable only if it is frivolous or was interposed for an improper purpose. Given the above, this motion is certainly not frivolous; therefore, the real issue is whether this motion was filed separately for some improper purposes. While the Special Master agrees with defendants that the instant motion could and should have been incorporated in plaintiffs' previous motion for summary judgement as to the issues of authorship and origin of NOTs, he declines at this time to hold that the motion was interposed for an improper purpose. However, it is important to note that by continuously filing piecemeal summary judgment motions or otherwise generating an inordinate amount of litigation regarding the same issue, i.e., motions for reconsideration, a party literally invites sanctions for interposing motions for an improper purpose. An order will follow. * * * ORDER Having considered the moving and opposing papers and exhibits in support thereof, as well as the arguments of counsel, IT IS HEREBY ORDERED THAT the following issues be summarily adjudicated as follows: (1) Mayo's substanial contribution to NOTs is a work made for hire under section 101(1) of The Copyright Act of 1976; and (2) as to Mayo's substantial contribution to NOTs, CSC is the author under the work made for hire doctrine. To the extent that this renders defendants' counter-claims meaningless, such claims are dismissed on summary judgment. IT IS SO ORDERED. DATED: JUNE 4, l991 [signed] JAMES G. KOLTS U.S. SPECIAL MASTER