kaatz vs graham court transcript

8/3/2019 Kaatz vs Graham Court Transcript

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SUPERIOR COURT - STATE OF CALIFORNIA

COUNTY OF RIVERSIDE

JEFFRY M. KAATZ, ) )

Plaintiff, )vs. ) CASE NO. RIC1112557

)RICARDO GRAHAM, et al. )

)Defendants. )

___________________________________)

REPORTER'S TRANSCRIPT OF PROCEEDINGS

Before the Honorable Ronald L. Taylor, Judge, Dept. 6December 5, 2011

APPEARANCES:

For the Plaintiffs: McCUNE WRIGHT LLPBy: RICHARD D. McCUNE, JR.2068 Orange Tree Lane, Suite 216Redlands, California 92374

For the Defendants: LEWIS, BRISBOIS, BISGAARD & SMITHBy: MICHAEL W. CONNALLY, Esq.650 Town Center Drive, Suite 1400Costa Mesa, California 92626

HIROCHIMA, JACOBS, ROTH & LEWISBy: JON DAGGETT, Esq.1420 River Park Drive, Second FloorSacramento, California 95815

Reported by: VANESSA LIZARRAGA-FELIX, CSR NO. 12829

VANESSA LIZARRAGA-FELIX, CSR


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1 RIVERSIDE, CALIFORNIA - DECEMBER 5, 2011

2 BEFORE THE HONORABLE RONALD L. TAYLOR - DEPARTMENT 6

3 THE COURT: Kaatz versus Graham.

4 MR. McCUNE: Good morning, Your Honor. Richard

5 McCune for the plaintiffs.

6 THE COURT: Okay. Mr. McCune, you represent

7 plaintiffs?

8 MR. McCUNE: Yes.

9 MR. CONNALLY: Good morning, Your Honor. Michael

10 Connally of Lewis, Brisbois, Bisgaard & Smith on behalf of

11 defendant, La Sierra University, Pacific Union Conference, and

12 the North American Division, The Church of Seventh Day

13 Adventist.

14 THE COURT: Okay. You're Mr. Connally.

15 MR. CONNALLY: Yes, Your Honor.

16 THE COURT: You're representing La Sierra University.

17 All right.

18 MR. CONNALLY: And Pacific Union.

19 THE COURT: Yes.

20 MR. CONNALLY: And North American Division

21 Corporation of Seventh Day Adventist.

22 THE COURT: Okay.

23 MR. DAGGETT: Good morning, Your Honor. John Daggett

24 representing Ricardo Graham, defendant.

25 THE COURT: Okay. Then we have a demurrer to the

26 complaint, and we have a motion to strike. We also have

27 another demurrer to the complaint, two more, and A motion to

28 strike portions of the complaint.



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1 So are we ready to move forward?

2 MR. McCUNE: Yes, Your Honor.


4 MR. DAGGETT: Yes, Your Honor.

5 THE COURT: Okay. All right. Then, let's take up La

6 Sierra's demurrers, and the motion to strike by La Sierra.

7 Would you just like me to give you my indicated sentence on

8 this?


10 THE COURT: Did anybody wish to be heard?

11 MR. CONNALLY: We'd all like hear your tentative

12 ruling.

13 THE COURT: Okay. La Sierra's demurrers to the

14 entire complaint on the grounds that the complaint fails to

15 state facts sufficient to constitute a cause of action.

16 Generally, La Sierra contends the Court cannot adjudicate

17 issues within a religious organization, otherwise, it would

18 violate the first amendment.

19 La Sierra also argues that there are no facts to

20 demonstrate that the tape recording was illegal. Of course,

21 the opposition disagrees with that. However, I would say as to

22 the motion to strike, the plaintiff admits that damages under

23 17,200 is improper and should be stricken, but, otherwise,

24 contends that the allegations are not irrelevant, and that the

25 punitive damages as to individual defendants and requests for

26 attorney's fees are proper.

27 La Sierra requests judicial notice of, number one,

28 the official teachings of the Church in its 28 Fundamental



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1 Beliefs; and, two, the 2010 bylaws of La Sierra. The Court

2 would deny La Sierra's request for judicial notice,

3 tentatively. The hearing on the demurrer may not be turned

4 into a contested evidentiary hearing the guise of having the

5 Court take judicial notice of affidavits, declarations,

6 depositions, and other such material which was filed on behalf

7 of the adverse party and which purports to contradict the

8 allegations and contentions of the plaintiff. I'm going to

9 give a case cite on that. It's Del E. Webb Corporation versus

10 Structural Materials Company, 1981 case, 123 Cal.App.3d, 593,

11 in particular, page 604, 605.

12 First, as to the teachings of the Church, La Sierra's

13 citation to Varcoe, V-a-r-c-o-e, versus Lee, a 1919 case, which

14 that's almost a hundred years old, but, in any event, that's

15 180 Cal. 338, 346 is unpersuasive to the Court. And in that

16 matter, the Varcoe court took judicial notice of the fact that

17 an area in the city was in a business area. In passing, the

18 court cited to an Ohio case where the court took judicial

19 notice of the doctrines of Christian Science. The court did

20 not adopt a ruling wherein it would take judicial notice of a

21 religious doctrine. In contrast, in court in In re Estate of

22 Wirt, W-i-r-t, which is a 1929 case, 207 Cal. 106, 110, page

23 110, 111, specifically declined to take judicial notice of

24 whether the objective of the Order of Masonry was a charitable

25 one.

26 Second, as to the bylaws, the interpretation of the

27 bylaws is in dispute in the complaint -- or as a result of the

28 complaint. Therefore, the Court cannot take judicial notice of



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1 the bylaws.

2 So we can go forward, or did anybody wish to be heard

3 at this moment in time?

4 MR. CONNALLY: Your Honor, Michael Connally for La

5 Sierra. I'm going to shorten it to the Church defendants. I'm

6 representing the three church institutions.

7 THE COURT: Yes.

8 MR. CONNALLY: You announced a tentative ruling on

9 the judicial notice. So I could focus our remarks, do you have

10 any tentative ruling on the demurrer and the motion to strike?

11 THE COURT: Yes, I do.

12 MR. CONNALLY: Thank you.

13 THE COURT: Okay. I'll move forward. All right.

14 MR. CONNALLY: I'd like to be heard, eventually, on

15 the judicial notice, but it will allow us to focus if we know

16 what the rest of the ruling is.

17 THE COURT: Okay. All right. Let's take up, then,

18 the argument that La Sierra makes that the Plaintiffs' claims

19 are barred by two portions the First Amendment, free exercise

20 of religion, and right to freely associate.

21 As to the first issue, the courts in interpreting the

22 First Amendment have, quote, "developed a general rule barring

23 judicial review of employment disputes between religious

24 organizations and their clergy employees." And that's a case

25 Schmoll S-c-h-m-o-l-l, versus Chapman University, a 1999 case

26 70 Cal.App.4th, 1344, in particular, 1438. Courts recognize

27 that the constitutional right that religious organizations to

28 choose their own employees in the employment of clergy.



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1 Courts, however, also recognize that, quote, "the First

2 Amendment is not implicated when a religious institution makes

3 an employment decision about an employee whose duties do not go

4 to the heart of the church function in the manner of a minister

5 or a seminary teacher, and that's the Schmoll case, which I

6 cited, at page 1439, footnote 9.

7 And, then, of course, let's take up the case, Hope

8 International University versus Superior Court 2004, 119

9 Cal.App.4th, 719, in particular, 723, a Christian affiliated

10 university fired two professors who allegedly had an affair

11 while one of the professor's divorce was pending. The

12 professors sued for marital status discrimination, under Tameny

13 and FEHA, breach of employment agreement and promissory

14 estoppel. The Hope court focused on the ministerial exception,

15 which are exceptions to federal and civil rights statutes, and

16 provides that the law should not be construed to govern the

17 relationship of the church and its ministers. Therefore, it's

18 the Court's view that the test is whether an employee's duties,

19 quote, "go to the heart of the church's function in the manner

20 of a minister or seminary teacher. And that's page 734 of

21 Hope. The court, however, drew the line on academics, the

22 court stated, quote, "the work of teaching religion for a

23 church, as distinct from a school, obviously comes within the

24 ministerial exception." Thus an employee whose role is

25 inherently a religious one like a campus chaplain, or where the

26 employee teaches the institution's own religion is subject to

27 the exception. But where an employee performs purely secular

28 work performed for a religious institution, the exception does



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1 not apply. And that is Hope at page 739. Since the professors

2 taught psychology, the court found that there was a triable

3 issue as to whether the professors fell within the ministerial

4 exception. That's at page 740.

5 And then we've got La Sierra's arguments, which I'm

6 not going to go into at this point, but based upon the facts

7 pled in the complaint, which the Court must take as true for

8 the purposes of the demurrer, the ministerial exception as

9 state in Hope applies. Accordingly, the exercise of religion

10 is not at issue as pled. And that goes to the first argument

11 of La Sierra.

12 The second argument is based upon a violation of

13 freedom of association rights under the First Amendment. In

14 the case, Boys Scouts of America versus Dale, 2000, which is

15 530 U.S. 640, in particular, 643, 645, the U.S. Supreme Court

16 held that a state's law, which required public accommodation

17 for homosexuals violated the Boys Scouts' right of expressive

18 association, since the Boy Scouts denied membership to

19 homosexuals. The court stated that to determine whether a

20 group is protected by the association right, the court must

21 first determine whether the group engages in expressive

22 activity. If the group does, then the court must determine

23 whether the inclusion of a member with contrary views would

24 significantly burden the group's beliefs. This is a very

25 fact-specific finding, and there are no allegations in the

26 complaint to suggest that plaintiff's criticism of the Seventh

27 Day Adventist Church, and the leadership of La Sierra, or

28 criticism of the accreditation process would significantly



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1 burden Defendants' beliefs for pleading purposes. Therefore,

2 the Court would indicate that it would overrule the demurrer on

3 these grounds.

4 With regard to the cause of action involving illegal

5 recording, as alleged in the complaint, every cause of action

6 is based on the allegation that Defendants wrongly used an

7 illegal tape recording of Plaintiffs' private conversations in

8 an attempt to coerce Plaintiffs to see sign a letter of

9 resignation, and the complaint alleges that in violation of

10 Penal Code Section 632 -- excuse me, that there is a violation

11 of Penal Code Section 632, as well as 18 USC 2511 and Article

12 1, Section 1 of the Constitution. The violation of these

13 statutes, however, is only alleged in the first cause of action

14 for the Tameny claim. The remaining cause of action focus on

15 the Plaintiffs' termination without cause or the use of threats

16 to coerce Plaintiffs' resignation, which essentially

17 constitutes a fraudulent misrepresentation. As such, I don't

18 see how or whether or not the tape recording was illegal is

19 relevant to the remaining issues.

20 Of course, I'm familiar with Penal Code Section 832.

21 La Sierra argues there's no allegations that Darnell

22 intentionally activated the tape recorder, in violation of the

23 Penal Code, and that even if he did, La Sierra could not be

24 held liable under Warden versus Kahn, which is a 1979 case, 99

25 Cal.App.3d 805. Plaintiffs do not address this argument in

26 their opposition.

27 Here there's no allegation that Darnell recorded the

28 private conversation with, quote, "intent to do so." Instead,



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1 the complaint alleges that Darnell recorded the faculty

2 meeting, but that the board member, I'm assuming refers to

3 Mr. Darnell, was unaware at the time that the digital recording

4 contained anything other than a recording of the special

5 faculty meeting. So I would then, tentatively, indicate that I

6 would sustain the demurrer only as to the first cause of

7 action, since it's based upon a statutory violation, and is not

8 alleged that the tape recording occurred with the requisite,

9 quote, "intent."

10 With regard to the 9th cause of action, intentional

11 infliction of emotional distress, La Sierra argues that this

12 claim is subject to the worker's compensation exclusivity

13 doctrine. Plaintiffs argue in opposition that La Sierra's use

14 of the recording and subsequent threats took the case out of

15 worker's comp field. Here, the Court would be inclined to

16 overrule the demurrer.

17 With regard to the 12th cause of action, violation of

18 Business and Professions Code Section 17200, La Sierra argues

19 that it cannot be held liable for a Section 17200 violation,

20 citing the case of Doe versus California Lutheran High School

21 Association, which is a 2009 case, 170 Cal.App.4th 838. I

22 think that case is distinguishable from the facts that we have

23 here, in that it involved students who filed a complaint for

24 violation of the Unruh Act, and that's 170, Cal.App.4th 828, in

25 particular, page 833. The court found that the religious

26 school was not a business enterprise subject to the Unruh Act,

27 and that's at page 841. The case did not discuss Sections

28 17200 at all. This instant action does not allege an Unruh Act



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1 violation. Therefore, the Court would overrule the demurrer.

2 With regard to the breach of contract claim, La

3 Sierra contends that Plaintiffs failed to plead the contract

4 terms or attach the contract, and that the contract terms may

5 be alleged generally according to legal intendment. The

6 relevant contractual term is that La Sierra would not terminate

7 Plaintiffs without cause. I think that's, in the court's view,

8 sufficient for pleading purposes.

9 La Sierra also is asserts that the allegations in the

10 complaint are contradictory. A party, however, may plead in

11 the alternative and make inconsistent allegations. Take a look

12 at the case of Adams versus Paul, a 1995 case, 11 Cal.4th 583,

13 593. So I don't agree that the complaint is somehow deficient

14 because it makes allegations in the alternative.

15 With regard to the motion to strike, La Sierra argues

16 that Plaintiffs have not obtained a court order to seek

17 punitive damages against a religious corporation pursuant to

18 CCP Section 425.14. Plaintiffs contend that they are not

19 seeking punitive damages against the Church, which is why

20 Plaintiffs ask for punitive damages against the individual,

21 Defendants. La Sierra points out in their reply that it

22 appears that Plaintiffs are seeking punitive damages against

23 the religious defendants. So then the Court will be inclined

24 to deny this, because the court -- this motion, because I do

25 think that sufficient facts are alleged.

26 La Sierra moves to strike damages as requested under

27 Business and Professions Code Section 17200. Plaintiffs

28 concede this point.



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1 La Sierra moves to strike attorney's fees under

2 Section 17200, or the common right of privacy claim, as neither

3 provides attorney's fees.

4 As to whether this actually involves a public right,

5 that can be determined on a motion for attorney's fees after

6 trial.

7 As to the remaining requests, La Sierra's motion to

8 strike repeats the allegation of the demurrer, and so the Court

9 is inclined to deny those remaining requests.

10 The other thing that's kind of interesting, I

11 understand there is case in front of the United States Supreme

12 Court that's been argued, a case out of Michigan, that involves

13 some very similar issues to this case here, and it's based upon

14 the ministerial exception. And I believe they've already had

15 oral argument in that case. I'm not sure what it's called, but

16 it is a case out of Michigan and involving ministerial

17 exception.

18 So anyway, that's how I see the demurrer to the

19 complaint and motion to strike.

20 Counsel?

21 MR. CONNALLY: Thank you, Your Honor. Mike Connally

22 for the Church defendants. First, just because it will help

23 lay out the scope of what we're dealing with, I'd like to

24 briefly address the judicial notice ruling, the bylaws, in

25 particular. While we do think that the Varcoe case, be it old,

26 does stand for a venerable and unchallenged proposition as to

27 religious beliefs that is only helpful in laying out context

28 for some of Plaintiffs' allegations. So the demurrer and



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1 motion to strike, still, we believe should lie as to those,

2 even if judicial notice is denied.

3 But as to the bylaws, there are two things that are

4 very important. First, Your Honor cited the Del E. Webb case.

5 THE COURT: Yes.

6 MR. CONNALLY: And I'm familiar with the Del E. Webb

7 case, and it actually stands for the opposite proposition as to

8 allegations that are contradictory to the complaint. In the

9 Del E. Webb case, at pages 604 to 605, which Your Honor had

10 cited, what the court did was -- it said the court's will not

11 close their eyes to situations where a complaint contains

12 allegations of facts inconsistent with, and it says, attached

13 documents, which they didn't do, or allegations contrary to

14 facts which are judicially noticed.

15 And then it goes on to say, the court will take

16 judicial notice of records such as admissions, answers to

17 interrogatories, affidavits, and the like, when considering a

18 demurrer, only where they contain statements of the plaintiff

19 or its agent, which are inconsistent with the allegations to

20 the pleading before the court. And it says that the hearing

21 can't be turned into a contested evidentiary hearing.

22 But, here, we're not talking about something that's

23 reasonably calculated to be disputed. We're talking about

24 exactly what the Del E. Webb court case says in an instance

25 where you can and should take judicial notice. Plaintiffs

26 selectively paraphrase and quote portions of the bylaws in the

27 trustees handbook of La Sierra University. They do it very

28 selectively, and present a misleading presentation to the court



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1 about what those bylaws hold.

2 Having done that, and having pled their conclusions

3 about what those bylaws mean, the Del E. Webb case actually

4 stands for the proposition that if you have something that

5 can't be contested, the full language of the bylaws, and they

6 don't dispute in their opposition to the judicial notice or the

7 demurrer or motion to strike, that we've quoted accurately part

8 of the bylaws that they omitted, and to those circumstances,

9 the court should not permit a plaintiff, buy selectively

10 quoting, and then offering conclusions about the meaning of a

11 document about which there is no dispute, to get buy and

12 present a claim that is obviously contradicted by those

13 allegations -- or by the bylaws and meritless. That's an

14 important point for La Sierra --

15 THE COURT: Yeah, but this is a demurrer. So it's

16 challenging the sufficiency of the pleadings. That very well

17 maybe the case, but, in fact, the interpretation of the bylaws

18 have been put into dispute as a result of the complaint.

19 MR. CONNALLY: Exactly, Your Honor, and that's my

20 point. The Del E. Webb case says that under those

21 circumstances the court can take judicial notice if a document

22 that the court can properly take as authentic, and there's been

23 no dispute as to the authentic bylaws being attached to our

24 request for judicial notice, that the court can take judicial

25 notice of the complete document.

26 And where that document contradicts allegations,

27 especially conclusionary allegations in the complaint, then the

28 court should not close its eyes to that artful pleading. And



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1 that's what's happened here, Your Honor. La Sierra University

2 and the Church organization --

3 THE COURT: Let me -- because I disagree with you on

4 that -- respectfully disagree with you. I don't reach the same

5 conclusion that you do, because where you're in a demurrer

6 situation, you take the facts of the complaint as true. It's

7 not possible for the court to do that with respect to the

8 bylaws, because counsel for the plaintiff has contested the

9 interpretation of the bylaws.

10 So I just don't agree with you on that. I reach a

11 different conclusion. I understand your position on this, but,

12 sir, I don't agree with it, and you're argument is not

13 persuasive to me.

14 MR. CONNALLY: Then, shifting to the bylaws

15 themselves, the fact that Plaintiffs have alleged only parts of

16 an operative document, and offered their opinions and

17 conclusions, makes this analogues, and, in fact, they've done

18 same thing as to the contract. They're pleading their

19 conclusions as to legal documents that should have been

20 attached to the complaint, and we've cited case law that says

21 that one cannot just offer a paraphrase and make that

22 equivalent to pleading the legal affect of the contract in

23 order to establish that you've pled to meet the burden for

24 pleading the effects of a contract or of the bylaws.

25 You have to plead facts showing that you've

26 accurately summarized all the material terms of the document.

27 And they certainly have not established that they have pled

28 facts that establish all the material terms of the bylaws.



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1 They haven't established or pled facts that show they've pled

2 all the material terms of the contract. They've -- they

3 haven't quoted, for instance, anything in these contracts that

4 say they're for cause, and they can't, because the bylaws make

5 it clear they aren't for cause. But --

6 THE COURT: Mr. Connally, let me tell you this, I

7 have a panel of 60 jurors coming in my courtroom in about 20

8 minute, so we've got to kind of move forward with this hearing.

9 MR. CONNALLY: Could I then focus on the First

10 Amendment?

11 THE COURT: Yes. Sure. Go ahead.

12 MR. CONNALLY: The Court's elaboration on the

13 ministerial exception --

14 THE COURT: Right, and I think that that's what

15 applies to the situation that we have here.

16 MR. CONNALLY: Except that I want to clarify, Your

17 Honor, because we don't site the ministerial exception as the

18 basis for our First Amendment defense. The problem here is not

19 that the Plaintiffs are alleging, we were terminated by La

20 Sierra University, and nothing more. The problem and the

21 reason why we've raised the First Amendment is that they're

22 alleging interference -- they're alleging that religious

23 organizations form of government is violative of their rights.

24 They have not -- we're not saying that these people

25 are -- that the Church defendants are entitled to reduce the

26 administrative duties of two of the people, and terminate one,

27 because of the ministerial exception. What we've alleged in

28 our demurrer is that the allegations about, for instance, that



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1 there's a conflict of interest between La Sierra University and

2 the Pacific Union Conference or the North American Division,

3 requires the court to examine what are the goals of the Pacific

4 Union Conference, the North American Division, and La Sierra

5 University. That's what we're arguing, and the Court's

6 tentative ruling addresses really a red herring that plaintiffs

7 raised, when they said, we don't fall within the ministerial

8 exception.

9 We aren't arguing that. We pointed out that, for

10 instance, they allege that there's a breach the fiduciary duty

11 by Pacific Union Conference, because it was looking at its

12 religious interest in the university, instead of allowing the

13 university to govern itself. Those are governance issues, and

14 we quoted from the complaint itself where Plaintiffs expressly

15 allege that to understand their complaint the court -- this is

16 at page 7 through 9, and the complaint at page 67, they say,

17 it's important to understand the importance of accreditation to

18 the La Sierra University as an institution of higher education.

19 The heated political climate surrounding a recent negative

20 accreditation by the Seventh Day Adventist Church Organization

21 charged with accrediting Seventh Day Adventist Education

22 Institutions, and the governance structure of La Sierra

23 University. That's the focus of our demurrer.

24 Their allegations require this court to involve

25 itself in deciding who is entitled to govern these religious

26 organizations, and whether these religious organizations are

27 entitled to take into account their educational and ministerial

28 goals, not the ministerial exception, but their



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1 interrelationship with each other. For example --

2 THE COURT: Sir, again, I've only got a limited time

3 right now. Let's ask Mr. McCune what his response is to your

4 argument in this area.

5 MR. McCUNE: The response on that is, Your Honor,

6 that the La Sierra University as alleged in the complaint is a

7 separate legal entity, and according to the bylaws, it is a

8 separate legal entity that's responsible to set its own policy,

9 curriculum, and operations through the board and through the

10 president. The fact that it has an affiliation with the

11 Seventh Day Adventist Church does not change that.

12 So the melding of all of these as one giant umbrella

13 of religious entities under the Seventh Day Adventist church is

14 not found by either the facts that are alleged in the complaint

15 -- the problem is we're turning this into a summary judgment

16 motion. We'll be able to deal with these kind of facts. But

17 as alleged in the complaint, and what is quoted in the

18 complaint, is this is a separate institution from these other

19 religious organizations that Mr. Connally is lumping them in.

20 THE COURT: Did you wish to be heard, sir?

21 MR. DAGGETT: Your Honor, if I may just say, I'd just

22 like to add in if it adds anything, that you can look solely at

23 the complaint, and you see that they allege La Sierra separate,

24 but they have causes of action against the higher Church

25 entities, as well as my client Ricardo Graham, claiming

26 breaches of fiduciary duty, and that Graham was acting on

27 behalf of PUC and NAD. The only way the Court can resolve

28 those questions is to determine whether that's proper, which



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1 necessarily involves it in a religious governance issues, which

2 is, in a sense, an entangling issue. That's has plainly on the

3 face of the complaint, regardless of anything we say.

4 There's no way the Court can resolve those questions

5 without excessively entangling itself in the governance between

6 those three entities. And it's not making a factual

7 determination at this stage. We're not asking you to find any

8 of those facts or not true. We're just saying for the Court to

9 resolve those facts, which it will have to do based on the way

10 the complaint is pled, it will be excessively entangling.

11 THE COURT: Just a second.

12 (Pause In The Proceedings)

13 THE COURT: We're trying to make some adjustments

14 here.

15 MR. CONNALLY: Thank you, Your Honor.

16 THE COURT: Okay. So did you -- if it's possible,

17 Mr. Connally, would you like to respond briefly, because as I

18 said, I don't really have time for extensive legal argument

19 this morning.

20 MR. CONNALLY: Yes, Your Honor. Plaintiffs counsel

21 just conceded a point. He said that this is going to require

22 the Court to look at La Sierra as a separate institution, and

23 they've alleged more. They've alleged this separate

24 institution has a religious institution communicating with it,

25 and they're trying to allege against my other two clients that

26 they're in tort, because they communicated with the religious

27 university. So it requires the Court to look at what should be

28 the relationship between a religious corporation, admittedly



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1 so, they've alleged that, and the two religious organizations

2 that are affiliated with it, and one of which founded it, and

3 so they're asking the court -- and that's why the ministerial

4 exception is a red herring. They're asking the Court to decide

5 whether it's proper for La Sierra University to consider its

6 religious ties, and its connections and communications from

7 religious leadership, when evaluating whether or not these

8 people are fulfilling their educational goals. And that's what

9 the problem is.

10 If Plaintiffs were to allege against La Sierra

11 University alone, there was some nonreligious tort that had

12 been committed here, we wouldn't be demurring. But they've

13 alleged much more than that. They've alleged that La Sierra

14 has committed the tort because it listened to its religious

15 affiliates.

16 Furthermore, Your Honor, you made a ruling that we

17 agree with, which is that the illegal recording are not

18 involved here, and Your Honor sustained the demurrer as to

19 first cause of action because of that, but that allegation

20 permeates this complaint.

21 THE COURT: It does.

22 MR. CONNALLY: So it's not just limited to the first

23 cause of action. For instance, the 17200 cause of action is

24 based entirely upon allegations that they violated the criminal

25 law. That's the alleged unlawful business practice that my

26 client is alleged to have committed. Your Honor has found that

27 they didn't violate the law. So that 17200 claim needs to

28 fall.



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1 THE COURT: I didn't find that they didn't violate

2 the law.

3 MR. CONNALLY: Well, Your Honor, I'm sorry. I maybe

4 overstated it.

5 THE COURT: Yeah, I think you did.

6 MR. CONNALLY: What you found was that they had not

7 pled that there was an intentional recording --

8 THE COURT: Correct.

9 MR. CONNALLY: -- so they hadn't pled facts showing.

10 THE COURT: Again, this is based upon pleadings.

11 What we're talking about here today is pleadings.

12 MR. CONNALLY: Right. And my point is, Your Honor

13 found they didn't plead an illegal recording, and that illegal

14 recording is the key not just to the first cause of action, but

15 the 17200 cause of action. So to be consistent, since Your

16 Honor ruled they haven't pled facts showing illegal recording,

17 they haven't pled facts showing the predicate for a 17200

18 unlawful practice.

19 THE COURT: I'm assuming that they would address that

20 in the amendment to the complaint.

21 MR. CONNALLY: Well -- but my point is you should be

22 sustaining the demurrer as to the 17200 cause of action with

23 leave to amend as well.

24 THE COURT: I see your point. So I'll sustain it as

25 well as to that cause of action.

26 MR. CONNALLY: And the illegal recording is in the

27 other four causes of action about the interference with the

28 contract as well. We've cited to --



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1 THE COURT: Let me just say this, if it's contained

2 in any other cause of action, maybe I missed that, but if it

3 is, it needs to be addressed in the amendment to the complaint.

4 MR. CONNALLY: Okay. So it will be sustained as to

5 those causes of actions where they've alleged the illegal

6 recording?

7 THE COURT: If it's in that cause of action, yes.

8 MR. CONNALLY: Okay. Moving to the motion to strike,

9 Your Honor.

10 THE COURT: Yes.

11 MR. CONNALLY: A very important issue that --

12 THE COURT: Again, be brief, Mr. Connally.

13 MR. CONNALLY: I understand. You had said that they

14 concede that the punitive damages against the corporation are

15 not being pled. But, at least as I heard it, you said that you

16 were going to deny the motion to strike. They've conceded

17 that -- if we could suggest --

18 THE COURT: Correct.

19 MR. CONNALLY: -- the ruling should be granting the

20 motion to strike as to the corporation. They've clarified that

21 they didn't intend to, but they do plead that fact.

22 THE COURT: I'm okay with that. I'll grant the

23 motion to strike it.

24 MR. CONNALLY: Okay.

25 THE COURT: It doesn't seem like it's necessary, but

26 that's fine.

27 MR. CONNALLY: Then, Your Honor, another important

28 issue that hasn't been addressed is the allegations about WASC.



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1 Plaintiffs have included a whole bunch of allegations about the

2 WASC accrediting association. They didn't defend those, and

3 their opinions and conclusions stated by WASC that also

4 required this Court to become involved in church governance

5 issues --

6 THE COURT: The court is not going to become involved

7 in church governance issues. I can assure you of that,

8 Mr. Connally.

9 MR. CONNALLY: Then the motion should be granted as

10 to the WASC allegations, because those allegations are

11 allegations about opinions and conclusions that WASC offered

12 about how this religious organization ought to operate its

13 university.

14 THE COURT: That motion is denied, with respect to

15 the WASC allegations.

16 MR. CONNALLY: Denied?

17 THE COURT: Isn't that what you said?

18 MR. CONNALLY: On what grounds?

19 THE COURT: Your motion.

20 MR. CONNALLY: Why should the WASC opinions and

21 conclusions about how religious organizations operate be

22 allowed, if you're not going to involve yourself in religious

23 issues?

24 THE COURT: Because this is the pleading stage. You

25 keep seeming to miss that point, and, in fact, it seems to the

26 Court as if you are attempting to use this as a summary

27 judgment motion, and the Court is not inclined to go along with

28 your strategy on this.



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1 MR. CONNALLY: Respectfully, Your Honor, what our

2 point is as to WASC, and it's important, the allegations are

3 irrelevant to the allegations in the complaint. They're

4 alleging that WASC had these opinions about what La Sierra did.

5 That's immaterial conclusions. Conclusions are not properly

6 pled, and they're not even talking about their conclusions.

7 They're pleading the conclusions of an outside organization,

8 and they're pleading their conclusions about an outside

9 organization's opinion of our religious operations.

10 THE COURT: Okay. Do you want to respond to that

11 Mr. McCune?

12 MR. McCUNE: I do, Your Honor. Mr. Connally is

13 confusing concepts here. It is their -- there are

14 representations, and I think that the factual basis will be

15 developed in discovery, that La Sierra has taken positions with

16 the accreditation as to their governance as it relates to our

17 clients, that is completely in conflict with what's being --

18 the position being taken here.

19 It is -- there is not a cause of action for violation

20 of WASC. It is part of the story that relates to the breach of

21 fiduciary duty, the breach of contract, the basic issues that

22 are being presented in this case, and it goes to the facts that

23 support Plaintiffs' position, and it will be developed in

24 discovery, and then at the appropriate time, the Court can rule

25 on its relevance.

26 THE COURT: You know, we're not making very good

27 progress here. So at this time, the Court is going to adopt

28 its tentative ruling with regard to the demurrer to the



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1 complaint and motion to strike. However, I still have the

2 demurrer by Pacific Union Conference, and I have the demurrer

3 and motion to strike by Graham.

4 I don't really believe we have the time to adequately

5 discuss these issues. So I think I'm going to trail the

6 balance of this hearing to another date this week so we have

7 more time. I don't feel we ought to just try to cram it into

8 the few minutes that I've got left before I start my trial.

9 So with that being said, what about Friday.

10 MR. CONNALLY: The 9th?

11 THE COURT: Yes, this Friday. That would be a good

12 day for me.

13 MR. CONNALLY: That's fine.

14 MR. DAGGETT: That's fine.

15 MR. McCUNE: That would work, Your Honor.

16 THE COURT: Okay. So let's trail it, and I'll tell

17 you what, I'll put you on at 9:30 so you don't have to sit

18 through the other calendar. So just come back at 9, 30 and

19 we'll have time to complete the -- actually, make that

20 9:00 o'clock. We'll just trail it until 9:00 o'clock, and then

21 we'll take up the demurrer to the complaint filed by Pacific

22 Union Conference, the demurrer to the complaint and motion to

23 strike portions of the complaint, okay.

24 MR. McCUNE: Before we adjourn, Your Honor, Plaintiff

25 would request leave to amend on the two issues that the court

26 found against them.

27 THE COURT: Yes, I'm going to grant leave to amend.

28 MR. DAGGETT: Actually, I would like to request the



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1 Court suspend entering a tentative ruling until Friday, because

2 a lot of the issues are so intertwined, it might make it

3 difficult if we're able to undo you on anything, Your Honor. I

4 don't see any harm in putting that off until Friday.

5 THE COURT: I don't agree with you on that. I'm not

6 going to suspend my ruling, Mr. Daggett. I'm not inclined to

7 suspend my ruling, okay.

8 MR. DAGGETT: Thank you, Your Honor.

9 THE COURT: You're welcome.

10 MR. McCUNE: Thank you.

11 MR. CONNALLY: Your Honor, if I could, do you have a

12 tentative ruling that we could review to focus remarks for

13 resumption of the hearing that might help everybody?

14 THE COURT: My tentative ruling?

15 MR. CONNALLY: Well, I'm not asking you to read it.

16 I'm just saying if you had, for instance, a tentative ruling in

17 printed form --

18 THE COURT: No, I don't.

19 MR. CONNALLY: Okay.

20 THE COURT: I could have done it that way, but that's

21 not normally the way I do it on the demurrer. Yes, I have

22 tentative rulings, but because we spent so much time on the

23 Seventh Day -- La Sierra University -- well, actually you

24 represent La Sierra Seventh Day Adventist, and you also

25 represent the Pacific Union Conference.

26 MR. CONNALLY: And North American, but they have

27 separate --

28 THE COURT: Okay. All right. Well, be back here



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1 this Friday at 9:00 o'clock, and we'll wrap this thing up.

2 MR. CONNALLY: Thank you.

3 MR. DAGGETT: Thank you.

4 MR. McCUNE: Thank you.

5 (Proceedings Adjourned.)

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REPORTER'S CERTIFICATE

JEFFRY M. KAATZ, ) )

Plaintiff, )vs. ) CASE NO. RIC1112557

)RICARDO GRAHAM, et al. )

)Defendants. )

___________________________________)

I, VANESSA LIZARRAGA-FELIX, Certified Shorthand

Reporter, No. 12829, do hereby certify:

That on December 5, 2011, in the County of Riverside

Dtate of California, I took in stenotype a true and correct

report of the testimony given and proceedings had in the

above-entitled case, pages 1 through 25, and that the foregoing

is a true and accurate transcription of my stenotype notes,

taken as aforesaid, and is the whole thereof.

DATED: Riverside, California, December 8, 2011.

_______________________________________

VANESSA LIZARRAGA-FELIX, CSR NO. 12829


kaatz vs graham court transcript

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