The rise of para-church organizations, no doubt necessary to the support of the church or its ministry are also the inspiration for limitations on the reach of the Ecclesiastical Abstention Doctrine (1st Amendment prohibition of entanglements between secular courts and church doctrine) and the Ministerial Exception (to federal and state employment laws). Para-church organizations include bible colleges, foundations, and corporations set up to control secular property, and sometimes even church buildings. Whether positions on the boards that govern the para-church organization are subject to either the Ecclesiastical Abstention Doctrine or the Ministerial Exception can only be determined after careful inquiries. Secular or ecclesiastic characterization will likely depend on organizational documents of the para-church organization that describe the goals and work as well as the job descriptions of the leadership. Just because board members must be clergy of the denomination does not automatically trigger either legal doctrine.
Puri v Khalsa, Slip Op. (9th Cir. 2017) is a case in which the 9th Circuit merely reversed a trial court’s decision to dismiss a case on the pleadings based on the 1st Amendment. Nevertheless, it took 33 pages for the Court to work through the issues, even though all that was before it were the pleadings. (Because of the high standards that Motions to Dismiss must meet, when a court does this, it usually is not an ultimate statement of the law. Nevertheless, this well reasoned opinion probably does cast a strong light on this issue.) Once the case is returned to the trial court, the case may follow a litigation track, may develop a more sophisticated factual record, may be tried to the bench or to a jury, and may return again to the appellate court.
The 9th Circuit was not moved by the fact that the board members had to be ministers of the denomination or religion served by the work of the para-church organization. The Court ordered Neutral Principles of Law applied by the trial court to determine the eligible board members for the para-church organizations (which all appear to have been corporations). One of the para-church organizations owned secular businesses.
There was an idea that surfaced many years ago that churches could set up a para-church corporation, transfer their property to it, and that would effectively make their property judgment proof. States with strong fraudulent transfer policies or laws might neutralize such arrangements. Also, such arrangements typically divorced the revenue stream from property ownership making the property unavailable as a credit source. Some encountered tax problems because the argument was made that the property was no longer owned by a church and therefore no longer exempt.
Para-church organizations that want to limit their work and property ownership to ecclesiastically recognizable activities, rather than risk that they are, indeed, secular and governed by civil law, need to carefully design their foundational documents and possibly amend them with the assistance of competent counsel. Many corporations set up using a form book, or worse a homemade document, are secular in design and not ecclesiastic in design, much to their surprise.