Economics sometimes requires denominations to reorganize local churches. If a denomination has several local churches in a locale that separately are no longer economically viable, merging the congregations into a single viable congregation is a possible solution. Indeed, it is often a better solution than allowing each local church to become insolvent, bankrupt, or to remain crippled. Denominations that control the geographical reach of their local churches may “suppress” the no longer viable local church. The decision making process of determining merger partners, surviving church staff employees, locations, and property disposition, to name but a few, invariably seem to set off disputes.
In Pagac, et al v Diocese of Pittsburgh, Slip Op. (PA 2020)(unreported), the denomination sought to “suppress” and then merge several local churches into a single survivor. The process, like most such do, suffered from fits and false starts. Eventually, the process was completed. Several parishioners of one of the closed local churches challenged in court the decision to “suppress” their local church. They also alleged that because their local church was formerly designated as a survivor of the process, and then later withdrawn from survival, they were defrauded of donations. The trial court dismissed both claims. The appellate court affirmed the dismissal of the challenge to “suppression” holding the parishioners did not have “standing” to make the challenge. Because the local church was “suppressed,” the Court held, the parishioners membership in the suppressed church no longer existed to form the basis of any challenge. Also, because any such claim would require an inquiry into internal church governance, the Ecclesiastical Abstention Doctrine precluded the claim. However, the appellate court reversed the trial court’s dismissal of the fraud claim. The appellate court held that while the denomination might have defenses to such a claim fraudulent inducement was a recognized claim and it could proceed to determination of the claim.
Whether to “suppress” a local congregation and merge it into another local church in a hierarchical denomination would in almost all cases require an inquiry into church governance issues protected by the Ecclesiastical Abstention Doctrine. Fraud in the inducement is a difficult claim to prove. Further, even if such a claim survived a motion to dismiss as this one did, running the gauntlet of discovery and other motions likely will prove more difficult. For one thing, the parishioners will have to prove that their donations were intended to be restricted to the local church and that their restricted donative intent was known to the denomination. They would also have to show expressions of restrictive donative intent were accepted by the local church or the denomination. Rarely are restricted gifts accepted at the offering plate but have to be specially arranged. Also, merely showing their local church was formerly designated as a merger survivor will not be enough. They will have to prove the designation was represented as irrevocable. They will have to prove the designation was intentionally misrepresented.
Church Litigation Update 