This report will be the second this year in which defamation was a significant or primary claim. In our post of February 8, 2018, entitled Internal Church Reorganization Defense, the defamation claim in a Texas case was dismissed because there was not a “scintilla of evidence” supporting it. The defamation claim was lodged in an employment case arising from a position lost due to an internal church reorganization, pretextual or not, but was not strong enough to carry the case.
In Diocese of Palm Beach, Inc. v Gallagher, Slip Op. (FL App., 4th Dist. 2018), a clergyman sued for defamation but his damages claims were all wrongful termination damages such as front pay, back pay, lost wages, and lost wage earning capacity. Typically, defamation damages are the dollar value of loss of reputation. Reputation was more of a nineteenth century damages concept although even today it can be a credible claim for damages in rare instances. As a result, the trial court held the case was a wrongful termination claim masquerading as a defamation claim and dismissed it on Ecclesiastical Abstention Doctrine grounds. The trial court may not have reached the Ministerial Exception Doctrine but probably would have if the case had continued. The Florida Court of Appeals affirmed. The facts of the case were interesting because the clergyman reported to secular authorities a child sexual abuse by another clergyman resulting in criminal prosecution and deportation of the offending clergyman. But, meanwhile, parishioners complained about the ministerial performance of the Plaintiff. The opinion leaves unanswered the question of whether the complainants were affiliated with the alleged abuser by ethnicity or national origin. Relying on those complaints, the diocese did not promote the Plaintiff to pastor but transferred him to another church. The Plaintiff gave an interview to the media which was reported as scathing to the diocese. The diocese responded with its own public denunciation of the Plaintiff, including a claim the Plaintiff “needed professional help” and was unfit to serve as a clergyman. The Plaintiff alleged the public statements of the diocese were defamatory. The trial court held that to resolve the claims the trial court would have to explore Plaintiff’s fitness which would involve the court in a church disciplinary matter crossing into ecclesiastical matters.
The actions that made the dispute intractable for both sides were their public comments and maybe, too, that their public statements were harsh. It is impossible to judge from this vantage point whether both or either speaker spoke irresponsibly, but both failed to count the legal cost of what was said. The more pressing problem that was not addressed insofar as can be gleaned from this court’s opinion was the lack of an internal hearing by church officers. Whistleblowers treated as pariah’s, even if there is no lawsuit, will remain a distraction for longer than would be the case if there was a full hearing and fact finding. The church need not and should not conduct such an inquiry in public but rather should adopt confidentiality provisions to cloak the inquiry. The purpose of the hearing is to make certain both whistleblower and church leadership have fully addressed all issues or frankly discussed disagreements. Another possibility is to engage outside counsel to conduct the inquiry and to carefully interview the whistleblower and make confidential recommendations to church leadership. Only by taking such substantive action is there hope either will trust the other.
Fortunately, there are few church bankruptcies. The bankruptcies that are of note are usually of larger hierarchical church organizations. Local churches may be foreclosed but after that typically they simply dissipate or meet in rented space or homes.
In Re: The Archdiocese of Saint Paul and Minneapolis, Slip Op. (8th Cir. 2018), four hundred clergy sexual abuse claimants represented by a creditors committee sought to consolidate all of the 200 affiliated non-profit corporations related to the archdiocese so that their assets could be added to the estate of the archdiocese. These 200 affiliated non-profit corporations included local parish churches, schools, charities and foundations. The 200 affiliated non-profit corporations were formed consistent with state law and as a result their boards were composed of the archbishop, vicar general, parish priest and two lay members appointed by the other three. The affiliates were allegedly directly or heavily controlled by the archbishop, and occasionally abolished some of the affiliates. However, the Unites States Court of Appeals for the 8th Circuit affirmed the trial courts that refused to grant consolidation. The 8th Circuit noted that the bankruptcy code allowed substantive consolidation only as an extra-ordinary equitable remedy to be ordered in rare cases. The occasional failure to adhere to corporate forms or the occasional discontinuation of an affiliate and absorption of its assets was not enough to warrant the remedy. The remedy was generally expected to be used only when affiliates were part of a Ponzi scheme or were, in fact, mere alter egos of the debtor, neither of which were before the trial court.
Failure to follow corporate forms if sufficiently pervasive that it results in commingling of assets may lead to a conclusion an affiliate is a mere alter ego. The sufficiency would seem to be reached if corporate forms are disregarded in a cavalier or criminal manner and not in a few isolated incidents. That the archbishop served on every board and had the power to remove board members, in the case reported herein, resulted as much from state corporation law applicable to all non-profit corporations. Thus, state corporation law should be consulted to make sure the composition of affiliate’s boards is either expressly authorized or expressly required.
Courts will typically refrain from resolving church leadership succession controversies. A court might make certain the process dictated by the church governing documents is followed such that usurpation is not likely to succeed, especially when in dispute are positions in congregational churches. In hierarchical church organizations, the courts seem less likely to resolve a dispute because church government is presumptively able to manage its own internal process for elections.
In our post on April 4, 2017, we reported the opinion in Puri v Khalsa, 844 F3d 1152 (9th Cir. 2017) in which the Oregon federal court dismissed the case on the pleadings and on appeal the United States Court of Appeals for the 9th Circuit reversed an Oregon federal district court decision. On remand, in Puri v Khalsa, Opinion and Order, (D. Or. Portland Div. 2018), discovery proceedings were followed by motions for summary judgment. Also, a state court four-week jury trial had been concluded on state law theories of recovery. In the case on remand, the Oregon federal court had all the evidence the parties could muster in discovery and the prior trial, too. The issue was whether the succession plan of the founding religious leader was enforceable or whether the boards of the denomination could revise or revoke the succession plan. The founding religious leader died and left written instructions with the lawyer of the corporation regarding the identities of the persons the late religious leader was appointing to the controlling boards. The Oregon federal court held that the boards could revise the succession plan. Also, the Oregon federal court concluded the evidence proved that while they may not be conventional churches the defendants were religious organizations. Also, the court held the board members, because of their authority to choose and remove religious leaders in the church, were governed by the Ministerial Exemption Doctrine. Finally, finding the entities to be religious organizations brought their internal decision-making into the Ecclesiastical Abstention Doctrine. Thus, the Oregon federal court dismissed the case.
Succession plans that involve binding beyond the grave are likely to fail. A founder that wants to preserve a legacy should do so before retirement or death. Governing documents that invest denominational boards with the authority to select clergy or other church leaders may likewise place the election of board members beyond the reach of a secular court. Internal processes that select these board members should be carefully designed to avoid over reaching and usurpation because secular court rescue may not be available. As the foregoing demonstrates, the founder’s legacy was costly to preserve or inherit, and may not, in fact, belong to the founder or the founder’s heirs.
Churches often own property and when that property is no longer mission critical the churches lease the property to a tenant. It provides the church a source of income from an asset that may one day again be needed. It allows the church to retain control of what is typically adjacent or nearby property. Of course, the Ecclesiastical Abstention Doctrine may apply to some disputes, in whole or in part, about church property. In Neutral Principles jurisdictions, secular issues may be decided and religious issues ignored or the reserved for decision by the church.
Beluah Pilgrim Holiness Church v Otto, Slip Op., Memorandum and Order (Mass. App. 2018) was an interlocutory appellate order concluding that the Housing Court had jurisdiction to hear eviction proceedings against tenants of church property. The Housing Court in Massachusetts, apparently from the opinion, conducts “summary proceedings,” which are probably cases tried only on written submissions and a due process hearing. Most likely, if either party desires trial of issues not suitable for that minimal process, the matter is transferred to a court of general jurisdiction.
The takeaway is that in Neutral Principles jurisdictions church landlords, and tenants, should be able to use limited jurisdiction courts and proceedings. The flip side is that they can be forced to participate in proceedings before those limited jurisdiction tribunals and should not assume the church will be able to easily ascend to a court of general jurisdiction.
Church employees that run afoul of basic moral tenets of church employers are often terminated. Whether this is good church policy or not depends on the situation and depends on the alternatives available. Unfortunately, sometimes it is a financial question because some members may not want their offerings used to deal with the consequences of sin in others who fail to hide the sin.
In Kelley v Decatur Baptist Church, Memorandum and Order (ND Ala., NE Div. 2018), the federal district court did not dismiss the Plaintiff’s case because the Plaintiff alleged she was terminated because she was pregnant in violation of Title VII. She also alleged she was a “maintenance” and child daycare employee. The church alleged the pregnancy was out of wed lock and that the Plaintiff “sowed discord” among the daycare employees, neither reason being governed by Title VII. The church also asserted the first reason for termination was driven by beliefs protected by the Ecclesiastical Abstention Doctrine and the Ministerial Exception Doctrine because the Plaintiff was a “minister.” The case was not dismissed because the Court had to assume as true the allegations in the Complaint at this stage of the proceedings and that at best there was a factual dispute that could not be resolved at this stage. The case will proceed into discovery and possibly other proceedings.
There might not have been a factual dispute if as a new employee the Plaintiff had acknowledged by signing a document describing her position and its duties as ministerial or if there had been an employee handbook similarly acknowledged that contained similar language. Such an employee handbook might have contained a morals clause that expressly listed pregnancy out of wed lock, for the father and the mother, as disqualifying criteria for working with the children entrusted to the church. The troubling aspects of the situation may have been reduced if the church had engaged and paid a license professional counselor to counsel the Plaintiff to reduce or end the “discord” among child care workers, especially if that effort failed, and to help her make the adjustment to motherhood. The Scarlet “S” approach, if the church took that approach as the Court’s opinion seems to suggest, did not seem to work so well.
The tenth report posted herein in February 2017, entitled The Chicken Did It, was about a 2016 case out of California in which the California appellate court reversed for further proceedings a case involving over flow parking. Well, there has been another one. However, the lesson from these two cases is radically different. The California case reversed for further proceedings because the church gave no warning about the busy street and took no other action to protect people jaywalking to the church. This report is about the opposite.
In Charney v Reitz, Slip Op. (PA Supp. 2018), the church had only four paved parking spaces but was able to use a commercial parking lot across the street for over flow parking. The use of the parking lot across the street was a practice that persisted for decades. But, the street to be crossed, which may have not been in the distant past, became a very busy street. The church sometimes had police or firefighters acting as crossing guards. The church used reflective cones to warn drivers. In a footnote, the court even reported the church tried to take other safety actions but was blocked by the state’s department of transportation. What was the church’s reward for this diligence? The court found the church voluntarily undertook the duty to safeguard persons crossing the street to attend church events. The remand would be a jury trial over whether the church carried out its duty adequately in the fatality pedestrian auto accident that was the subject of the case. The deceased was a church member and was actually the person that purchased the reflective cones, so the deceased knew about the risks of crossing the street. But, the deceased was 84 years of age.
Trying to read the two cases side by side is disheartening because the church that did allegedly nothing, according to the court in California as reported in the February 2017 post, faced the same trial as the church reported in this post that did several things and may have been stopped from doing more. Of course, as a practical matter, the church that tried to address the problem may with the right jury find exoneration. Both churches hopefully had adequate insurance coverage and their legal fees were probably paid by those insurers. In addition to making certain their insurance policies covered use of an over flow parking lot, the churches should petition, maybe repeatedly, state, county or city traffic authorities to install flashing yellow warning signs, an officially installed and painted cross walk, and other safeguards. While the government in most states cannot be successfully joined as a party, they make a great “empty chair defendant.” Your trial counsel can explain that one to you.
A famous teacher of evangelical pastors once told me that pastors had no choice but to be jacks of all trades. In this blog, the cases reported involve everything from financial controls, zoning, internal security for vulnerable members, property titles, and corporate control issues, just to name a few.
In Christ’s Legacy Church v Trinity Group Architects, Inc., 2018 OK CIV APP 31 (oscn.net), a division of the Oklahoma Court of Appeals reviewed a trial court summary judgment in favor of an architectural firm in a case about the design of a church building. The church claimed the architectural firm was negligence and breached its contract. The Court of Appeals affirmed the judgment against the church as to the negligence claim but reversed and sent the case back to the trial court on the breach of contract claim. The architectural firm claimed the written proposal was not signed by the church so there was not a written contract. If there was only an oral contract, the statute of limitations was three years but if the contract was in writing the statute of limitations was five years. The Court of Appeals held it did not matter whether the proposal was actually signed if it, indeed, represented in writing the agreement of the parties and had been acknowledged in another way.
In the trial court, the church will have to prove the written proposal was the written contract under which the architectural firm did the work even without a signature. One change order to the “proposal,” or a couple of emails, or “in re” lines on a letter or a fax will probably do it. Thus, once again, a case may be determined on whether in the age of scanners and computers the church was a reasonable records custodian. The statute of limitations barred the negligence claim because the church did not, or could not, investigate fast enough to present a claim. Most volunteer run churches usually have no more than one or two FTEs neither of which are professional property managers so the time to investigate gets away quickly. Also, well-meaning church members tend to stand around and gawk at a problem none of them are fully competent to address. Church boards need to hire the professional that can address the problem, pay for the service, and get a definitive answer with dispatch, which may include trial counsel. Large engagements like engaging an architect to design a building require as stewardship a written contract signed by everyone. One more thing for the pastor to know, right?