FILED

NOT FOR PUBLICATION AUG 04 2014

MOLLY C. DWYER, CLERK

UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

In the Matter of: CRYSTAL No. 13-56039

CATHEDRAL MINISTRIES,

D.C. No. 2:12-cv-10879-RGK Debtor,

MEMORANDUM*

ROBERT H. SCHULLER; ROBERT

HAROLD, INC.,

Appellants,

v.

KAREN SUE NAYLOR, Plan Agent;

CRYSTAL CATHEDRAL MINISTRIES,

Reorganized Debtor,

Appellees.

Appeal from the United States District Court for the Central District of California R. Gary Klausner, District Judge, Presiding

Argued and Submitted May 12, 2014 Pasadena, California

Before: PREGERSON, REINHARDT, and NGUYEN, Circuit Judges.

* This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3. Dr. Robert H. Schuller (“Schuller”) and the corporation Robert Harold, Inc.

(“RHI”) appeal from a district court order affirming the judgment of a bankruptcy

court. We have jurisdiction pursuant to 28 U.S.C. § 158(d)(1), and we affirm.

1. The bankruptcy court did not err in subjecting Schuller’s claim to the

one-year cap in 11 U.S.C. § 502(b)(7).

Section 502(b)(7) limits “the claim of an employee for damages resulting

from the termination of an employment contract” to “the compensation provided

by such contract, without acceleration, for one year . . . .” The bankruptcy court

determined that Schuller was an “employee” of Crystal Cathedral Ministries, and

that his contract with Crystal Cathedral Ministries (the “Transition Agreement”)

was an “employment contract.”

We find no error in the determination that Schuller was an “employee.”

Where, as here, a statute does not otherwise define the term “employee,” “the term

‘employee’ should be understood in light of the general common law of agency.”

Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 741 (1989). On balance,

the Reid test leads us to conclude that Schuller was an “employee” of Crystal

Cathedral Ministries. This conclusion is consistent with the language of the

Transition Agreement and the purposes of § 502(b)(7).

2 Because we find no error in the conclusion that Schuller was an “employee,”

we also find no error in the conclusion that the Transition Agreement was an

“employment contract.”1

2. The bankruptcy court correctly dismissed the claim by RHI. RHI’s

claim against Crystal Cathedral Ministries under the Transition Agreement is

essentially a claim for breach of contract. See 11 U.S.C. § 365(g) (“the rejection of

an executory contract or unexpired lease of the debtor constitutes a breach of such

contract”). But RHI was neither a party nor a third-party beneficiary of the

Transition Agreement: indeed, the Transition Agreement does not even mention

RHI. Thus, the bankruptcy court properly concluded that RHI was owed nothing

under the Transition Agreement.

Appellants’ argument that Crystal Cathedral Ministries owed RHI money for

using Schuller’s likeness and other intellectual property is unsupported by the

record.

AFFIRMED.

1 Unlike the dissent, we do not believe that the Transition Agreement is best characterized as a retirement agreement. The favorable terms and considerable discretion that Schuller enjoyed under the Transition Agreement were reflective of his superior bargaining position, due in part to the substantial contributions he made to Crystal Cathedral Ministries as a key employee. Looking at the language of the Transition Agreement as a whole, these terms alone do not convert the Transition Agreement from an employment contract into a retirement agreement.

3

FILED

Schuller et al v Naylor 13-56039 AUG 04 2014

MOLLY C. DWYER, CLERK

REINHARDT, dissenting: U.S. COURT OF APPEALS

This case presents a difficult question regarding how best to characterize an

unusual retirement agreement between a church and its founding pastor. My

disagreement with the panel majority stems from the fact that I find the relevant

question to be whether Dr. Robert H. Schuller is a retiree or an employee, whereas

the panel majority applies the test for whether a person is an employee or an

independent contractor. See Cmty. for Creative Non-Violence v. Reid, 490 U.S.

730, 752 (1989).

11 U.S.C. § 502(b)(7) is inapplicable to claims for retirement benefits by

retirees. See, e.g., In re Irvine-Pac. Commercial Ins. Brokers, Inc., 228 B.R. 245,

247 (B.A.P. 9th Cir. 1998); In re Prospect Hill Res., Inc., 837 F.2d 453, 455 (11th

Cir. 1988). Although the question is a close one, the Transition Agreement in the

instant case is best characterized as a retirement agreement, rather than an

employment agreement. The principal purpose of the agreement was to provide

for Schuller’s retirement from his position as Senior Pastor while defining the kind

of relationship he would have with Crystal Cathedral Ministries in the future

should he wish to continue a relationship. The agreement provided that

compensation would continue even in the event of Schuller’s death, and the role

anticipated for Schuller–fund-raising “as his interest and time permit,” chairing the board, and serving as “roving Ambassador” for Crystal Cathedral Ministries–are

more akin to an emeritus status than an employment relationship. There is no

indication that Crystal Cathedral Ministries could require Schuller to perform any

tasks, as one would expect in a contract for ongoing employment. Schuller would

clearly be outside the scope of Section 502(b)(7) as a retiree had he discontinued

the relationship altogether. We should not penalize him for maintaining a

relationship with the church he founded.

Accordingly, I conclude that Section 502(b)(7) is inapplicable and I

therefore respectfully dissent.