Author: churchlitigationupdate

DAUGHTER CHURCH DNA TESTS

Although usually the governing documents of a local church or a denomination, or both, instantly resolve the question of whether a local church is, indeed, a member of a denomination and under its ecclesiastical jurisdiction, sometimes it is not clear. Many denominations have humble origins among immigrant communities, the uneducated, and the poor.

In Sacred Heart Knanaya Catholic Community Center Board v St. Thomas Syromalabar Diocese of Chicago, Slip Op., 2019 IL App 2d 180792, the appellate court affirmed summary judgment dismissing the case on Ecclesiastical Abstention Doctrine grounds. The Plaintiff claimed it was not a church at all and not under the jurisdiction of the denomination, in any event. The Plaintiff sued the denomination because the denomination would not authorize a third-party church to celebrate mass at the community center for a special program. The reason for refusal was not reported in the opinion. The denomination provided minimal proof the community center was under its religious jurisdiction. However, it was enough. The community center may have been able to disprove it was part of the denomination, but inadequate legal representation may have waived the right to do so.

Two lessons emerge. The Plaintiff should have engaged counsel experienced in civil litigation. Just because someone is a “lawyer” and has a license to practice does not mean the attorney is a civil case lawyer. (I have avoided the label “trial lawyer” because most civil cases no longer reach trials.) Just because a lawyer is part of the church membership does not make that lawyer qualified to handle a civil case. The other thing the community center board should have done, rather suing for tortious interference with contract and money damages, was to seek a declaratory judgment regarding its lack of affiliation with the denomination. That would likely have required application of neutral principles.

WHEN IS A CHURCH NOT A CHURCH?

Many church and parachurch organizations have both observable religious and secular operations, missions and facilities. Many such have also found that secular income can fill in gaps that volunteer donations, such as tithing, offerings, and gifts, sometimes cannot. Viable churches that can raise enough money to pay a small staff and keep a facility are usually doing all their members will support. Thus, secular income may become a lifeline, which is why many churches also own daycare centers and other businesses. Of course, there are some churches and parachurch organizations that seem more about their secular business interests than their religious.

In the Matter of the Application of the Holy Spirit Association for the Unification of World Christianity, Petitioner, 2019 NY Slip Op 31678 (U), the non-profit religious organization, which seemed from the opinion to be at the same time a church and a parachurch organization, owned a corporation that owned a hotel in Manhattan. Permission was sought for a $20 million mortgage, $18.5 million to be used to buyout union employment contracts with the hotel and the transaction costs. The purpose of the buyout was to improve the profitability of the hotel. The New York Attorney General objected to the application because the AG did not believe the mortgage was in furtherance of a religious purpose. The Petitioner set about proving it was a church owner of secular businesses by proving it was a church holding worship services, employing a pastor, and conducting a seminary in some of its space. Also, some space was leased to other non-profit organizations. It also claimed $5.7 million in annual donations from congregants. The Court granted the petition for approval holding that the Court had to accept the representations of the church petitioner as long as it did not appear on its face to be a sham or proven by the AG to be a sham. The AG did not attempt to do so.

While the legal proceeding described above would never occur in most states, these issues most often emerge when the issue of tax exemption arises. Churches and parachurch organizations with dual identities should not assume their religious identity is obvious and be prepared to document it. Corporate records like board minutes that memorialize votes on religious mission efforts as well as secular business management are probably dispositive. Such church organizations can also organize and own trusts that then in turn own their secular business interests for the benefit of the church.

CHURCH SPLIT FRAUD ALLEGATIONS

In order to plead fraud in most jurisdictions, the fraud must be set forth in the pleadings with particularity. Generally, conclusory allegations will not get through the pleading stage. Sloppy court systems may allow discovery to be conducted on conclusory allegations but that now seems to be the exception rather than the rule. If money was improperly taken, then the amounts, dates, persons and means should be set forth specifically. Rumors will not typically get it done. Many churches, especially small and larger independent ones, will tend toward loose financial practices even in the absence of culpable impropriety that does not amount to fraud. A broken promise is by itself not a fraud. “Scheming” is both legal and illegal so by itself amounts to nothing in legal terms.

In Ambellu v Ethiopian Orthodox Church, Memorandum Opinion (D DC, 2019), the federal trial court dismissed the lawsuit because the allegation requirements of the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”) were not met. As a practical matter, RICO cases are very difficult to pursue because the allegation and proof standards are not easily met. RICO was designed to address organized crime, not church splits and not the occasional defalcation. Likely, the Plaintiffs in this case were trying to engage federal court jurisdiction by using a federal statute like RICO because of some perceived advantage not thought to be available in the DC Superior Court. Federal judges are not typically willing to tolerate loose pleading practices that might escape the notice of less well funded and understaffed state court systems. The Plaintiffs, indeed, alleged the Defendants publicly proclaimed their intention to take over the church in community radio broadcasts. Actions out in the open are usually harder to qualify as fraud because fraud usually only succeeds because some or all of the actions are “done in a corner.” Even a fraudulent act or series of acts in a local church will not likely threaten no future criminal conduct or enterprise as required to make a RICO claim. The allegation that church board elections were not conducted might be addressed pursuant to the non-profit corporations statute. But, as a state level legal issue, the federal court cannot be forced to consider it if there is no basis for federal court jurisdiction. That the Plaintiffs were seeking money damages via RICO but not reinstatement of the former church board was specifically noted by the Court. The Court also noted that the right to be a member and to worship at a church is an ecclesiastical issue. The Court also noted that mere financial questions, how the church spent its money, are also ecclesiastical.

If a church split must spill out into the street and into a court, the most likely allegation that will survive, absent actual fraud that can be proven from the start or breach of contract, is that the ownership and control of the property of the church has been brought into question by a violation of the bylaws or the non-profit corporation statute. Both can usually be addressed by application of neutral principles and not run afoul of the Ecclesiastical Abstention Doctrine. Indeed, church board members probably have a fiduciary duty to the church corporation that can be enforced. To guard against such problems, a clear set of bylaws should be adopted and preserved.

CONFESSIONAL TOLLING

The statutes of limitations are intended to prevent stale claims from being litigated. The idea is that stale claims are unfair to litigants because memories fade, witnesses die, and standards change. Such statutes are good policy. However, if a wrongdoer decides to hide the wrongdoing, and especially if the wrongdoer succeeds, then the statute of limitations does not begin to run until the victim or injured party knows or should have known through reasonable efforts. This is also a reasonable policy because the wrongdoing has not ended until the conspiracy of silence ends.

In Rice v Diocese of Altoona – Johnstown, 2019 PA Super 186, (PA Supp. 2019), the trial court reluctantly dismissed claims of fraud, constructive fraud and civil conspiracy because the alleged child molestation occurred in the 1970s and 1980s. The appellate court reversed holding that whether an alleged effort to hide the wrongdoing occurred, and thus prevented tolling of the statute of limitations, was a question of fact for the jury. The plaintiff alleged she discovered the alleged conspiracy to hide the molestation in grand jury testimony made public in 2016 and immediately filed suit. The plaintiff alleged the last act of the conspiracy was in 2016 revealed or further perpetuated in the grand jury testimony of 2016.

Limitations discovery rules are not new and the response to these types of rulings has been a more aggressive public disclosure of “credible accusations” by various denominations and churches. The risk of a defamation claim has been deemed less than further untolled limitations as to molestation claims. Confession may be both good for the soul and good litigation risk management.

THE FINAL JUDGMENT, AGAIN

Increasingly, it seems, in civil litigation, following a similar trajectory in criminal law, there is no closure. Church litigation is increasingly no exception.

In September 2017 and then in December 2017, federal court and state court opinions in Patterson v Shelton, were reported herein. See the post, And Then Again, Maybe Not. In 1991, the founder and pastor of the church died. The power struggle that ensued was the stuff of legends, dueling and feuding, that is. It resulted in published appellate opinions in 2013 and 2017: 175 A3d 442 (Pa. Cmwlth. 2017); 78 A3d 1092 (PA. 2013). The first conflict involved the struggle to determine who was in charge. The second wave involved the conclusions of a forensic accounting investigator that hundreds of thousands of dollars were misappropriated by the church leadership that succeeded the founder. The third wave involved an arbitration decision in 2006 in which the arbitrator was persuaded by the forensic auditor and appointed a receiver to recover the assets of the church. The appellate court overturned the arbitration award concluding the arbitrator went beyond the scope of contractual authority in fashioning relief. See, 942 A2d 967 (Pa. Cmwlth. 2008). The fourth wave of litigation was the claim that Patterson was not a church leader but merely a member and did not have standing under the not for profit corporations statute to bring the claims. The appellate court overruled the trial court and held as a church member and beneficiary of the not for profit corporation, the church, Patterson had sufficient standing to bring claims. The fifth wave was marked by a bench trial regarding the claims conducted in 2014. The trial court concluded it did not have jurisdiction under the Ecclesiastical Abstention Doctrine of the First Amendment and dismissed the case. That had the effect of leaving the arbitration award as the last determination because the trial court, in effect, held that every decision made thereafter lacked jurisdiction. In the sixth and latest wave of Patterson v Shelton, the trial court was asked to strike its orders enforcing the arbitration award as the final judgment. The trial court declined. The appellate court affirmed.

One reason this litigation became so protracted was that the courts made two errors. The courts did not inquire into their own jurisdiction and its limits early in proceedings. The other was to allow judicial hostility to arbitration to again raise its long discredited visage. Arbitrations are no more or less effectual as dispute resolution mechanisms than jury trials. While judges may have greater experience than arbitration panels in dispute resolution, which in some cases would make a bench trial a better forum, the routine case does not benefit from such experience enough to invalidate the arbitral forum. Only arbitral forums that are either so expensive or so without procedural safeguards that their decision making is suspect are inferior in the typical routine case. However, if the parties contractually selected the forum, it should be assumed both sides knew the costs and the risks. If an arbitrator’s awarded relief seems to exceed the contractual grant of authority, the better practice is to either judicially revise the relief given or to remand to the arbitrator for the revision. Simply vacating the award leads to a quagmire.

DISCIPLINARY DEFAMATION

If a church through its local governing documents and denominational, if any, governing documents requires that disputes between members, especially church leadership, must be resolved pursuant to a particular procedure or process, then courts are likely to hold that defamation claims by the disparaged member or leader are barred by the Ecclesiastical Abstention Doctrine. This may be true even if the disparagement “leaks” out into the community and is not solely confined to the church.

The case of In Re Alief Vietnamese Alliance Church and Phan Phung Hung, Slip Op. (Tex. Civ. App. 1st 2019) was a request by a church for a writ sought from the appellate level to preclude the trial court from proceeding with a defamation lawsuit. The trial court overruled a plea to the jurisdiction. The appellate court ordered the trial court to dismiss the case on jurisdictional grounds or the appellate court would issue a writ of mandamus ordering the trial court to do so. In Texas, the Ecclesiastical Abstention Doctrine is a bar to exercise of jurisdiction by a court in most instances. However, the facts recited by the appellate court, and that the appellate court was not itself unanimous, demonstrated the factual uncertainty that might have led the trial court to decide it should proceed. The allegations of the disparaged person seemed from the appellate majority opinion more certain regarding internal church disciplinary disparagement but less so with regard to intentional or reckless dispersal beyond the confines of the church. Mere slight “leakage,” my words for brevity and not the court’s, did not seem sufficient to the majority to mutate the internal disparagement inherent in disciplinary matters, true or not and with or without malice, to defamation outside the shield of the First Amendment.

Discipline is inherently disparaging, at least to certain hearers. It is always based on an alleged violation of church procedure, church law, or morality endorsed by the church in some manner. Thus, church leadership should carefully keep such matters confidential even as to members that do not need to be informed. Greater still should be the confidentiality maintained with regard to non-members. The only exception to either should be in those rare instances when a governmental law enforcement agency must be involved, e.g., child abuse, child pornography, child neglect and offenses requiring registration as a sex offender. Even then, a church should engage legal counsel to determine what is safe to report or shield from the public and or the membership. The test is legal; it is no longer based on a belief or lack thereof in “guilt.”

THE DEATH OF FOUNDERS

The passing of a founding pastor by death or retirement often is the opening event in a church split. Also, founding pastors of earlier years did not see the need for governance documents that provided for succession. The thought in the last generation was that such provisions weakened the pastor and invited rebellion. What it actually invited was the destruction of all that had been achieved by the founding pastor when the church, without a succession plan in the governing documents, fell into factional strife or a civil war. Church splits in these circumstances are not surprisingly intractable.

In Nelson v Brewer, 2019 IL App (1st) 173143, the Illinois appellate court affirmed the trial court’s efforts to save the church by holding that neither the plaintiffs nor the defendants were properly elected or appointed church board members or pastors and that the church governance documents did not comply with state corporation law. There was no plan of succession in the documents and the founding pastor, the only one with any authority, had passed away. One faction tried to lock out the other. The court ordered the factions to avoid any contact. The trial court then appointed a “custodian,” a type of corporate guardian, to rewrite the church governance documents, to conduct congregational elections of board members and a pastor, and to otherwise manage the resuscitation of the corporate entity. The alternative was corporate dissolution and liquidation of all assets. It appeared that there only 28 voting members left after eight years of litigation.

While many church members and leaders met by the author over the years pride themselves on the paucity of their church governance documents, those same members and leaders often appear as factional leaders in a church split. Invariably, it seems, when a generation that was able to maintain harmony begins to pass away without a clear succession plan, competitive factions arise. The failure to plan for the passing of the torch to successors in governance documents is irresponsible and unfair to the members that do not have ambitions other than to see their church home survive.