MONEY DOES NOT MORPH THE CHURCH INTO THE STATE

Historically, it was not uncommon for church sponsored or operated orphanages and children’s homes to fill the gap between state facilities and the need.  It was also not uncommon for these parachurch organizations to accept state funding for state wards when the state had no available facilities in the locale.

In Doe v Archdiocese of St. Louis and Anderson, Memorandum and Order (ED Mo. 2022), the federal trial court dismissed the federal law claims with prejudice and dismissed the state law claims without prejudice.  (This is a standard federal trial court practice to allow state law claims to be pursued in state trial courts if the Plaintiff so desires, but it ends the federal law claims unless continued in an appeal.)  The Plaintiff alleged that he was sexually abused forty years ago at a children’s home operated by the Defendants in violation of a federal constitutional right.  Such a claim is brought to federal court under federal statutory authority:  42 USC §1983.  The Plaintiff after extensive discovery was never able to prove the Defendants as operators of the children’s home were “state actors” rather than private actors.  The Plaintiff argued that the children’s home accepted state reimbursement for holding wards for which the state had no other placement available in the locale.  According to the Plaintiff, taking the money converted the parachurch organization to a “state actor.”  The federal court held merely accepting funds from any level of government does not convert the private entity to a “state actor.”  The court cited Rendell-Baker v Kohn, 457 U. 830 (1982) in which the private school derived nearly all of its funding from state funds but was still held not to be a “state actor.”

In the reported case, there was no written contract between the parachurch organization and the state.  The payment of the funds indicated there was at least some form of oral contract.  A formal contract may have contained terms that altered the role of the parachurch organization.  The federal civil rights claims possible through §1983 might have been tempting to the plaintiff as an effort to escape Missouri’s two year statute of limitations or even the more specific ten year statute that applied to sexual abuse.

ECCLESIASTICAL ABSTENTION JURISDICTION

Generally, in order for the separation clause of the First Amendment to have any real meaning, the Ecclesiastical Abstention Doctrine has to be a jurisdictional barrier to litigation and not just liability.  The real horror of litigation is the cost of litigation; liability may make the headlines, but the cost of litigation is a burden that might even be greater than the value of winning.

In Doe v Roman Catholic Bishop of Springfield, Slip Op. (Mass. 2022), the Plaintiff alleged being a victim of sexual misconduct perpetrated by certain church leaders in the 1960s but only being able to remember it forty years later when the stories of other victims appeared in the news media.  The Plaintiff sought to report the assault in 2014.  A church sponsored investigation at first treated the Plaintiff’s complaint as not credible.  The church did not report the matter to law enforcement until 2018.  The news media in 2018 reported that the church review did not confirm the Plaintiff’s allegation.  A second review commissioned by the church later lifted it to “compelling and credible.”  The church in 2020 apologized both for the alleged rape of Plaintiff and the “chronic mishandling” of the Plaintiff’s allegation since 2014.  The Massachusetts appellate court held the common law charitable immunity doctrine, abolished by the state legislature in 1971, nevertheless applied to the allegations of sexual assault in the 1960s.  The charitable immunity doctrine was founded on the premise that funds received by a church or charity did so as a public trust and had the duty to assure the funds were spent on the mission, and not on cost of litigation or liability.  Thus, those counts were immediately dismissed.  The mishandling of the complaint of the Plaintiff in 2014 remained actionable because the conduct complained of occurred after the charitable immunity doctrine was abolished.  The Ecclesiastical Abstention Doctrine was held not to be a jurisdictional bar to litigation, even if it was or might be a bar to liability.

Treating the Ecclesiastical Abstention Doctrine like an affirmative defense, rather than a bar to jurisdiction as in the case reported, means while liability may someday be limited or eliminated, the cost of litigation will continue until there is a final decision by summary judgment or trial.  Discovery could be limited in such cases to jurisdictional facts which might blunt the impact.  While it would seem that the Ecclesiastical Abstention Doctrine’s applicability, because it is an effort by courts to obey the separation clause of the First Amendment, should be handled at the outset to tame the hungry lion of the cost of litigation, some courts will not reach that conclusion in the absence of specific legislative intervention.

SECULAR ORGANIZATIONAL DOCUMENTS

The concept of Neutral Principles of Law is founded on the idea that certain documents are not so ecclesiastical in their composition, purpose and usage that courts can resolve certain church related disputes.  Typically, those documents are property deeds, church corporate organizational documents required or authorized by a state, and denominational organizational documents.  In denominational procedure and policy manuals and handbooks in which the operational rules of the organization are typically published, there may be secular sections that are removed from ecclesiastical issues.

In Re Texas Conference of Seventh Day Adventists, Slip Op. (Tex. Civ. App. 2nd 2022), the appellate court “allowed” the trial court to dismiss the case for lack of jurisdiction.  Texas views the Ecclesiastical Abstention Doctrine as a jurisdictional limitation on the authority and power of Courts to hear cases involving churches.  The denomination forced the pastor after a quarter century of service to retire.  He continued to serve the local church for five more years.  The local church during those years gathered money for the pastor’s pay and transferred the cash to the denomination so the denomination could exercise the payroll function.  The denomination terminated the pastor at the end of the five years.  The local church did not resist and prepared to wind down the payroll fund and pay the pastor the remaining balance.  The denomination ordered the remaining balance transferred to the denomination but paid the pastor nothing further.  The local church turned to its savings account to obtain funds to continue operating.  The denomination prevented withdrawals from the savings account.  The denomination changed the locks on the church property and excluded the local church leaders and members from gathering at the church property.  The local church sued the denomination and alleged the denomination violated the secular provisions in the denominational manual that placed ownership of the funds taken and the church property in the ownership of the local church.  The appellate court held that the Ecclesiastical Abstention Doctrine does not allow secular issues entangled with ecclesiastical issues, such as church governance and authority, to be heard in Texas courts.  The trial court was permitted to dismiss the case.

The opinion does not explain how the denomination came to control the savings account otherwise held by the local church.  The denomination apparently ordered the local church financial officer to transfer the payroll fund to the denomination.  Therefore, implicitly, the denominational control of the finances of the local church predated the dispute.  Local churches that wish to retain some financial autonomy must open their bank accounts in their own ownership and update authorizations periodically.  Denominations that wish to avoid local church financial autonomy must require all local church funds be deposited in denominational sweep accounts.  The denomination can fund a petty cash account at the local church for basic operational necessities.

INEVITABILITY OF NEUTRAL PRINCIPLES

In the changing denominational and doctrinal environments in which local churches and denominations find themselves, the ability of local churches to leave the denomination with their property intact is problematic at best.  Organizational and governance documents of both denominations and local churches which were typically drafted in a past era, and rarely or never updated, generally drive the loss of local church property to the denomination.  It seems less often, but property ownership documents like a deed, especially older ones, often buttress the organizational documents.

In Hebron Community Methodist Church v Wisconsin Conference Board, Opinion and Order (WD Wisc. 2022), the federal court dismissed the federal constitutional challenge by a local church against a Wisconsin statute that expressly preserved the ownership interest of the denomination in the event the local church “disaffiliated.”  The argument, which may have been correct, was that the statute violated the Establishment Clause of the First Amendment.  However, the federal trial court never reached the constitutional challenge because the local church could not overcome the traditional Neutral Principles of Law analysis adopted in Jones v Wolf, 443 US 595 (1979).  The Jones case held “courts may look at the “language of the deeds, the terms of the local church charters, the state statutes governing the holding of church property”” and the provisions therein.  In the reported case, the 1855 deed and the 1963 deed recited the property was owned by the denomination.  The local church’s articles of incorporation adopted in 1963 stated the local church would “support the doctrine, and it, and all its property, both real and personal, shall be subject to the laws, usages, and ministerial appointments of the Methodist Church.”  The denominational documents indicated the local church held its property in trust for the denomination.  The local church amended its articles of incorporation a month after filing the lawsuit against the denomination to quiet title.  No organizational or other document authorized “disaffiliation” by merely unilaterally amending articles of incorporation.  The trial court held that because all of the Neutral Principles of Law markers, deeds and organizational documents, pointed the same way, and against unfettered ownership of the property by the local church there was no reason to reach the constitutional challenge of the statute.

These cases almost uniformly counsel against the effort of the local church to try to keep its property.  The local church would be better off to borrow against the property if it is paid off and default, or simply hand a mortgaged property over to the denomination, and use the resources otherwise to be consumed in litigation to start anew.  If the property value and the mortgage are not too disparate, the local church might be able to negotiate a different outcome because there may be little for the denomination to gain if equity is thin.  While there might seem to be a lack of morality in the foregoing suggestions, and some might blanche at them, the only other alternative is simply to abandon property to the denomination and start anew.  If there is a “moral” reason for the “disaffiliation,” it might have such a cost.