In the Matter of: CRYSTAL CATHEDRAL MINISTRIES v. KAREN SUE NAYLOR, Plan Agent; CRYSTAL CATHEDRAL MINISTRIES, Reorganized

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In the Matter of: CRYSTAL
CATHEDRAL MINISTRIES,
Debtor,
ROBERT H. SCHULLER; ROBERT
HAROLD, INC.,
Appellants,
v.
KAREN SUE NAYLOR, Plan Agent;
CRYSTAL CATHEDRAL MINISTRIES,
Reorganized Debtor,
Appellees.
No. 13-56039
D.C. No. 2:12-cv-10879-RGK
MEMORANDUM*
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.
FILED
AUG 04 2014
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.

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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

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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

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Schuller et al v Naylor 13-56039
REINHARDT, dissenting:
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
FILED
AUG 04 2014
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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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.

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