IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Civil Action No. 95-K-2143

RELIGIOUS TECHNOLOGY CENTER, a California non-profit corporation,

and BRIDGE PUBLICATIONS, INC., a California non-profit corporation,

Plaintiffs,

v.

F.A.C.T.NET, INC., a Colorado non-profit corporation; LAWRENCE WOLLERSHEIM, an individual; and ROBERT PENNY, an individual,

Defendants.

MOTION FOR LEAVE TO FILE

FIRST AMENDED ANSWER

In accordance with the provisions of D.C.COLO.LR 7.1(A), counsel has conferred with opposing counsel and has been advised that opposing counsel will not agree to the filing of an Amended Answer.

I. INTRODUCTION

1. Pursuant to Federal Rules of Civil Procedure ("FRCP") 13(f) and 15(a), Defendants F.A.C.T.Net, Inc. ("FACTNET"), Lawrence Wollersheim and Robert Penny ("Defendants"), through their respective counsel, respectfully request leave to file a First Amended Answer ("Amended Answer") to the First Amended Complaint ("Amended Complaint") of Plaintiffs. The proposed Amended Answer is attached hereto as Exhibit "A." It contains several affirmative defenses and counterclaims not specifically set forth in the original Answer, as well as some other minor revisions.

2. Leave to grant Defendants' motion for leave to amend is within the discretion of this Court; and the Court should grant the motion because: (1) a court should freely grant leave to amend in order to permit parties to have their claims determined on their merits in a single action; (2) new attorneys, with greater experience and insight into Plaintiffs' background and litigation history, have recently been substituted into this case on behalf of Defendants, and these attorneys should be permitted to amend Defendants' Answer to assert meritorious defenses and counterclaims overlooked by the previous attorneys; (3) Plaintiffs will not be unfairly prejudiced by the amendment of the Answer, since relatively little discovery has been done in the case and there is as yet no trial date; (4) Defendants' failure to file the proposed counterclaims in the original Answer was caused by the oversight, inadvertence, and neglect of previous counsel, who were inexperienced in Scientology matters; (5) the proposed amendments contain meritorious defenses and counterclaims; (6) Defendants have neither previously amended their Answer, nor sought leave to do so; and (7) Plaintiffs have refused to stipulate to the filing of Defendants' Amended Answer.

II. STATEMENT OF FACTS

3. Plaintiffs filed their Complaint and motions for Temporary Restraining Order, Preliminary Injunction, and Writ of Seizure and Impoundment against Defendants on August 21, 1995. Plaintiffs filed their First Amended Complaint on or about October 2, 1995. Defendants, through their previous attorneys, Faegre & Benson, filed their Answer on October 12, 1995. After numerous motions were heard, but little discovery was done, Plaintiff BPI filed a Motion for Summary Judgment for copyright infringement. In August, 1996, Faegre & Benson, who had no prior experience in litigating against Scientology and had spent approximately $1.4 million in attorneys fees in only about four months, withdrew as counsel for Defendants -- citing a "suddenly discovered" conflict of interest. A trial date has not been set.

4. On November 21, 1996, FACTNET's new counsel, Graham E. Berry, of Musick, Peeler & Garrett, LLP, was admitted pro hac vice to practice before this Court, as was Wollersheim's new counsel, Dan Liepold, of Hagenbaugh & Murphy. On January 30, 1997, Michael Berger, of the law firm of Waldbaum, Corn, Koff, Berger & Cohen, P.C., entered his appearance in the case on behalf of Defendant Penny. Counsel Berry, Liepold and Berger (collectively, "Defendants' New Counsel") received over 350 boxes of files from Defendants and others to review in order to get "up to speed" on this case. After reviewing these files and engaging in interviews with pertinent witnesses, Defendants' New Counsel now seek leave to file a First Amended Answer -- to incorporate into this lawsuit the meritorious defenses and counterclaims that they have discovered were negligently omitted from the original Answer by Faegre & Benson.

5. The new defenses include: (1) laches; (2) collateral estoppel; (3) res judicata; (4) Plaintiffs are not the owners of the alleged copyrights; (5) Plaintiffs obtained the alleged copyrights by fraud, duress, undue influence, or other improper methods; (6) the Ninth Amendment to the United States Constitution; (7) justification (self-defense); (8) justification (defense of others); (9) justification (whistleblowers); (10) justification (public interest and/or public benefit); (11) Section 117 of the Copyright Act; (12) ultra vires; and others.

6. The new counterclaims include: (1) declaratory judgment (copyright); (2) wrongful search and seizure; (3) trespass to real property; (4) trespass to personal property (chattels); (5) conversion; (6) abuse of process; (7) invasion of privacy; (8) intentional and negligent infliction of emotional distress; and (9) outrageous conduct.

III. ARGUMENT

A. The Court Should Freely Grant Leave To Amend.

7. Leave to grant Defendants' motion to amend is within the sound discretion of this Court. Gillette v. Tansy, 17 F.3d 308, 312 (10th Cir. 1994); Arkansas-Platte & Gulf Partnership v. Dow Chemical Co., 886 F.Supp. 762, 765 (D.Colo. 1995). Pursuant to FRCP 15(a), "leave [to amend] shall be freely given when justice so requires." Foman v. Davis, 371 U.S. 178, 182 (1962); Gillette, 17 F.3d at 312; FRCP 15(a). "If the underlying facts or circumstances relied upon by [the party seeking to amend] may be a proper subject of relief, [the party] ought to be afforded the opportunity to test its claim on the merits." Foman, 371 U.S. at 182. "The rules governing amendment and supplementing of pleadings are generally liberally construed in favor of permitting amendment, consistent with the goal of ensuring that all related claims are litigated in a single action." Arkansas-Platte, 886 F.Supp. at 765.

8. In the present case, justice requires that this Court grant leave to amend for the reasons set forth below. By granting Defendants' motion for leave to amend, the Court will be deciding this case on a more complete record of the merits of Defendants' position -- thereby furthering the goals of justice and efficiency.

B. Amendment Is Appropriate Because Defendants Have Retained New Counsel, More Experienced In Litigating Against Plaintiffs.

9. Where a party has retained new counsel, that counsel should be permitted to amend his client's pleadings to provide the client with the appropriate claims and defenses to properly litigate the case. See, e.g., Gillette v. Tansy, 17 F.3d 308, 313 (10th Cir. 1994); Davis v. Yellow Cab Co., 35 F.R.D. 159, 162 (D.C.Pa. 1964). In such circumstances, courts have permitted the amendment of the pleadings even two years after the original pleadings were filed. See, e.g., Davis, 35 F.R.D. at 162.

10. In the present case, Defendants filed their original Answer on October 12, 1995. In August of 1996, Faegre & Benson, the original counsel for Defendants, withdrew. Defendant FACTNET's and Wollersheim's new counsel were admitted pro hac vice to practice before this Court on November 21, 1996, a little over two months ago. Defendant Penny's new counsel, Michael Berger, entered his appearance on January 30, 1997.

11. Defendants' New Counsel have had significantly more experience litigating against Scientology than Defendants' previous counsel. With that experience as a background, Defendants' New Counsel has now completed their initial review of Defendants' case, and move to amend the Answer to incorporate those meritorious facts and arguments which previous counsel omitted. Such an amendment is consistent with the policy of determining a case on its merits, and thus should be permitted here.

C. Plaintiffs Will Not Be Unfairly Prejudiced By The Amendment Of The Answer.

12. Plaintiffs will not be unfairly prejudiced by the amendment of the Answer because adequate time still remains before trial for them to conduct discovery concerning any new issues arising from the Amended Answer. In fact, a trial date has not even been set, and relatively little discovery been done.

13. While Plaintiff BPI may argue that it is unfairly prejudiced because it has already filed for summary judgment, Defendants' opposition to that motion is not presently based on any of the new defenses, other than to the extent that the new defenses could be considered part of current defenses such as "fair use" and "copyright misuse." In addition, any prejudice to BPI is overridden by a need to decide the case on its merits. Plaintiff RTC has not filed a summary judgment motion, or any other dispositive motions. Thus, Defendants should be permitted to amend their Answer.

D. Defendants' Failure To File The Proposed Counterclaims In The Original Answer Was Caused By The Oversight, Inadvertence, Or Excusable Neglect Of Previous Counsel.

14. FRCP 13(f) permits the amendment of an answer to add counterclaims that were omitted "through oversight, inadvertence or excusable neglect." Generally, courts have been quite liberal about granting leave to amend under FRCP 13(f). See, e.g., Smith Contracting Corp. v. Trojan Constr. Co., 192 F.2d 234 (10th Cir. 1951); Wright, Miller & Kane, Federal Practice and Procedure: Civil 2d, §1430, p. 213. Moreover, when the addition of a counterclaim is requested in combination with a motion for leave to amend under FRCP 15(a), the more liberal standards of Rule 15(a) are frequently applied to the addition of the counterclaim. See, e.g., T.J. Stevenson & Co. v. 81,193 Bags of Flour, 629 F.2d 338, 370 (5th Cir. 1980); Wright, Miller & Kane, supra, §1479, p. 573.

15. Defendants' previous counsel, Faegre & Benson, had no experience litigating against Scientology prior to the present case. This lack of experience caused them not only to spend an astronomical amount of money ($1.4 million) in a short period of time, but also caused them to inadvertently overlook some of the pertinent counterclaims (and defenses) available to Defendants in the present case.

16. For example, had Faegre & Benson been more familiar with the Scientologists' litigation history and techniques, it would likely have realized that Scientology's true purposes for this suit, and for the searches and seizures of Defendants' property, were (among other things) to harass Defendants, gather confidential information harmful to Scientology, and inhibit Defendants' ability to lawfully assist opponents of Scientology. Faegre & Benson inadvertently missed the fact that Scientology obtained the Writ of Seizure in this action by providing Judge Babcock with false and incomplete information about Defendants, and that the searches and seizures conducted pursuant to that Writ were violative of Defendants' Fourth Amendment rights.

IV. CONCLUSION

17. For the foregoing reasons, Defendants respectfully request that this Court grant them leave to file the attached First Amended Answer.

DATED: February ____, 1997

Respectfully submitted,

BEEM & MANN, P.C.

By__________________________________

Clifford L. Beem, #917

Attorneys for Defendants -

F.A.C.T.Net, Inc. and

Lawrence Wollersheim

One Norwest Center - Suite 3901

1700 Lincoln Street

Denver, Colorado 80203

(303) 894-8100