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Will Scientology’s Motion Demolish the Garcias’ Federal Fraud Lawsuit?

On Friday, Scientology filed a motion to disqualify the attorneys for Luis and Rocio Garcia in their federal fraud lawsuit against the church. We very rapidly posted the motion and several supporting declarations with only a brief description of their contents.

We’ve had some time now to digest the church’s motion, and we thought we’d take a closer look at its argument and whether it has a chance to disqualify attorney Ted Babbitt from this case, which would seem to be a devastating blow to the Garcias.

In the motion, the church argues that Babbitt has inappropriately relied on the help of Robert Johnson, an attorney who represented the church in numerous actions between 1983 and 1999. Johnson’s apparent conflict taints Babbitt, the motion says, and should disqualify him. We asked attorney Scott Pilutik to give us his thoughts about the motion. We also have more information about Brian Culkin, whose declaration the church believes supplies the key evidence for its position. And we’ve heard from Ted Babbitt himself, whose comments follow Pilutik’s.

Scott, how do you read the motion?

The legal issue would seem to boil down to two points.

First, is attorney Robert Johnson conflicted — in the sense defined by Florida Rule 4-1.9?

Second, can that conflict also be imposed on (in legal terms, “does it impute to”) Ted Babbitt, the Garcias’ attorney?

If the answer to both is yes, then the conflict could result in disqualification of Babbitt. Florida Rule 4-1.9 is directly on point here. An attorney who has formerly represented a client cannot later (a) represent another person in a “substantially related matter” in which the person’s interests are “materially adverse” to the former client; (b) use information relating to the former representation to the disadvantage of the former client, with some exceptions, such as information that has become generally known; or (c) reveal information relating to the representation, with some exceptions.

For the purposes of this motion, let’s assume as true the declarations of Glen Stilo, Judy Fontana, and Peter Mansell, which explicitly detail Johnson’s years representing CSRT, and other Scientology entities like FLAG, on mostly real estate but also on refund issues.

Babbitt would probably argue that because Johnson ceased his association with Scientology in July 1999, nearly 14 years ago, the supposed conflict is “rendered obsolete by the passage of time.” The notes to 4-1.9 also state that…

general knowledge of the client’s policies and practices ordinarily will not preclude a subsequent representation; on the other hand, knowledge of specific facts gained in a prior representation that are relevant to the matter in question ordinarily will preclude such a representation.” [emphases added]

Scott Pilutik

Scott Pilutik

So another argument for Babbitt is that whatever facts about Scientology that Johnson possesses are too general, outdated, and non-specific to render his involvement as conflicting here. I honestly have no idea how closely the court will look at this, but my immediate thought was that Johnson is conflicted. He worked numerous refund cases so is familiar with Scientology’s tactics, including its routine First Amendment defenses. I’m not sure how much the passage of more than 13 years matters in this regard, because Scientology has not undergone any regime change over that time.

However, in Morgan Stanley v. Solomon (purportedly cited by Johnson in response) an attorney was found not to have run afoul of 4-1.9 despite defending Morgan Stanley for years in securities arbitration and then later becoming a plaintiffs’ attorney bringing securities arbitration cases against Morgan Stanley. The court in Solomon interpreted “substantially related matter” narrowly, conceding that the cases brought would likely have significant overlap with regard to legal theories and tactics, but was nevertheless persuaded that the former and present cases relied on “unique facts.” Babbitt would argue that Johnson is like the attorney in Solomon, who was permitted to “[switch] sides and [bring] cases under the same legal theories as those [he] previously defended.”

Scientology argues that the Solomon case (as well as a few others, see pp. 20-21) are inapplicable but I’m not so sure; I think Solomon could be right on point, with respect to refunds at least. More curious is the claim that Johnson was supposedly “briefed” on the “timing for opening the building, necessary and staff precedents to any opening, and strategic issues regarding the timing of the opening of the building coinciding with other events and activities.” (Silo Declaration, para. 20.) This is somewhat compelling because timing of the Super Power Building’s opening would go to the heart of the Garcia fraud claim and perhaps bring this under the “substantially related matter” umbrella. However, Stilo’s claim is a bit thin without documentary evidence of that briefing.

But remember, Johnson isn’t representing Garcia and isn’t even alleged to have had contact with Garcia. So even if we presume Johnson is conflicted in the general sense, which may or may not be the case, the question turns on whether there is an attorney-client relationship between Johnson and Garcia. This question is governed by Florida Rule 4-1.10, and is a more difficult argument for Scientology to make. Cases on imputation are largely concerned with instances where Attorney X joins Firm A, and whether the taint of any conflicts Attorney X brought with him or her to the new firm can be contained.

Here, Johnson is alleged to be Babbitt’s “co-counsel,” and a “case manager” to a larger litigation plan, though these theories seem a stretch given how little contact the two are alleged to have had with each other.

Even Culkin is unsure whether Johnson was on the two conference calls with all Scientology litigants. Of course, Johnson did file as a party of interest to the Garcia case, and it does seem likely that Johnson has shared with Babbitt knowledge of Scientology’s processes and tactics. So who knows how this goes.

Finally, I guess it’s worth mentioning that because so much of Scientology’s argument rests on the facts stated in Brian Culkin’s declaration, Babbitt could argue that Culkin’s testimony is untrustworthy and unreliable, since he evidently cut a deal to get his refund. It’s also curious how some of the statements in Culkin’s declaration are legal arguments to bolster Scientology’s disqualification argument as opposed to factual assertions of which Culkin would have some awareness (for example, para. 6: “This is an example of Mike Rinder using his expertise in Church affairs and his knowledge of information he had represented to me he obtained from his previous dealings with Church attorneys about Church legal strategies to aid the litigation team.”).

I paid zero attention to the garbage argument about Rinder and Rathbun’s involvement somehow working to disqualify Babbitt because Rinder and Rathbun aren’t attorneys.

 
As Scott points out, Scientology’s inclusion of former church officials Marty Rathbun and Mike Rinder does seem superfluous to the motion. We’d bet they were only added as a sop to Scientology leader David Miscavige, who loathes his former employees.

Yesterday, we spoke with Ted Babbitt, who told us he’d been out of town over the weekend and was just getting his first look at the motion. We asked how much time he had to answer it, and he said he wasn’t sure, but assumed he had 15 days to submit a response.

“It’s not going to be dispositive. There will probably have to be discovery and an evidentiary hearing,” he says. In other words, Scientology’s lawyers have brought up some issues that Babbitt will need to gather facts about before he can answer. But Babbitt also questioned the timing of the church’s motion.

“One could ask the question, why would they file this before a ruling on the motion about arbitration?” he asks.

He’s referring to the fact that at any moment, federal Judge James Whittemore is expected to rule on Scientology’s motion that the Garcias be compelled to take part in the church’s internal arbitration scheme and remove the case from court. And if Whittemore did side with the church, the lawsuit would be done with. So why not wait for that ruling?

“The only thing I can think of is they’re desperate, or it’s to prejudice the judge and make him think we’re bad guys,” Babbitt says.

Babbitt says Whittemore isn’t the kind of judge who could be prejudiced so easily, and he expects that Whittemore will rule on the arbitration argument before he even looks at the church’s motion to disqualify Babbitt and his team.

Ted Babbitt

Ted Babbitt

“A lot of this is silly,” he says, pointing specifically to the statements about Mike Rinder and Marty Rathbun. “What Mike Rinder has said about Scientology he’s already said on your blog,” Babbitt says dismissively. “And I’ve never spoken to Marty Rathbun. I’ve never communicated with him by e-mail or any other way.”

As for Robert Johnson, the attorney who previously litigated for the church, Babbitt says, “His role is limited. He’s not named in the litigation. The reason he’s not named is that he’s not involved. We needed someone in Tampa to meet new clients and get information from them, but he’s not involved in the formation of any pleadings or anything else in litigation proper.”

Babbitt has scheduled a meeting Tuesday to discuss a response with his team.

“I think it’s a baseless motion,” he says. He also pointed out that he’s never met Brian Culkin.

As to Culkin’s involvement, he spent less than a year in Scientology, leaving it in February 2010. But in that short time, Culkin has said he turned over a total of about $350,000. (Many Scientologists end up turning over sums that large during the course of their careers in the church, but almost no one spends that much so quickly.)

In November, 2011, Culkin was featured in a major series by the Tampa Bay Times, “The Money Machine,” and the chapter on Culkin explained how he was constantly hounded for donations.

Since then, he told us he was trying to get his money back from Scientology, preferably without filing a lawsuit.

On February 17 of this year, he received a letter from Sarah Heller, legal director of the Church of Scientology’s Flag Service Organization. (The FSO runs Scientology’s spiritual Mecca, the Flag Land Base in Clearwater, Florida, where church members go for expensive, high-level courses.)

In her letter, Heller noted that on February 10, Culkin had got back in touch with the FSO about seeking a refund. Heller noted that two years earlier, Culkin had been offered some repayments by the church. In February 2011, he was offered $13,868.95 from the Church of Scientology Boston, and in March 2011, he was offered $13,203.48 from Flag. But when he was sent a release to sign for those refunds, he refused.

Now that he was asking for money again, Heller told him he could get a repayment if he subjected himself to “ecclesiastical arbitration” — the same process that had become an issue in the Garcias’ fraud lawsuit.

On March 10, Heller wrote an e-mail to Culkin with more specific information about setting up an arbitration panel.

Then, on March 26, Culkin received his refund and signed a declaration about his involvement with Mike Rinder and the attorneys who were talking to various people about becoming litigants against the church.

The declaration appears to have been typed up by the church itself — it contains numerous hand-written corrections, presumably by Culkin.

In recent days, Culkin has called numerous people, telling them that he received a full refund — $350,000 — in return for signing the declaration. He apparently did not have to go through arbitration after all — and so much for the church following its own procedures.

As Heller notes in her affidavit, the day after Culkin signed his March 26 declaration, Scientology’s attorney, Wally Pope, notified Robert Johnson’s firm, Gray/Robinson. Writes Heller…

At approximately 11 pm the same evening, I received an email from Mr. Culkin stating that he was aware that his declaration had been used by the Church. I spoke to him the next morning and he told me that the night before, Mike Rinder had called him and had “given him an earful” about the declaration.

We spoke with Mike Rinder, who says he did hear about Culkin signing a declaration through the attorneys.

“I sent Brian a Facebook message, asking, ‘Did you sign an affidavit for the church?’ He called me about a minute later, saying he would never do such a thing. He had not signed any affidavit, he said, and he was acting mortally wounded that I would consider that he may have done such a thing,” Rinder tells us.

We have talked to other sources who also say that at the end of March, Culkin was telling them that he had not signed a declaration for the church, only some miscellaneous papers to finalize his refund.

More than a month later, when it became public on Friday that Culkin had indeed signed a declaration about Rinder and Johnson, he reacted by posting a message in our comments which included these words: “There is nothing in that declaration that was secret in any way, shape, or form.”

Actually, there was quite a lot in the declaration that had never been made public regarding his interactions with Rinder and others. Based on these statements from Culkin, it appears that his veracity may become an issue if evidentiary hearings are held.

Obviously, it’s going to be very interesting to see how Babbitt responds, and how Judge Whittemore handles things. We’ll be watching.

 
——————–

Posted by Tony Ortega on May 13, 2013 at 07:00

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