Author: churchlitigationupdate

WHAT IS SAID IN CHURCH STAYS IN CHURCH? OR DOES IT?

The amount of intensely personal information safely distributed to the “church family” is not clear in all cases and jurisdictions. In some jurisdictions, the “confessional privilege” is recognized and not in others. In some jurisdictions, mandatory child abuse reporting statutes make the extent of confessional privilege unclear. Can the pastor or priest inform the hierarchy of a confession? In congregational churches, is there a “confessional privilege” at all and does it extend beyond clergy? If a small group ministry is involved in drug, alcohol, or marriage counseling, does the “confessional privilege” extend to such a group? If a member of a church is accused of child abuse, to what extent must other parents be informed or warned, and can they be warned of allegations not confirmed judicially? Can warnings be given to non-members at all?

In Koster v Harvest Bible Chapel, Slip Op. (Iowa, 2021), the Supreme Court of Iowa affirmed dismissal by the trial court of breach of fiduciary duty and defamation claims against a church and pastor. Allegations of child abuse were made by a wife against a husband on multiple occasions. However, subsequent investigations by law enforcement did not confirm the allegations. The family court hearing divorce proceedings awarded “physical care of the children” to the husband. Before the family court decision, however, the pastor circulated email to various church leaders and church members, and one non-member that was active in the church, regarding the wife’s allegations and recommended staff, members and the non-member to refrain from accepting the husband’s version of events. The trial court held the circulation of the emails to staff, members and the non-member fully involved in the church did not constitute publication sufficient to sustain a defamation claim. The trial court also held there were no facts presented that the pastor knew the allegations were false or recklessly disregarded the truth. The defamatory statements were potentially linked to internal church disciplinary processes. Some of the disclosures were by the wife and some arose in small group marriage counseling sessions. The trial court also held that the fiduciary duty claim required intrusion into church internal management to determine the parameters of such a duty and whether it was breached by the pastor. The Ecclesiastical Abstention Doctrine, the Court held, deprived the Court of jurisdiction to make such an inquiry into internal church management.

The case reported was alluring because a non-member was informed. The exact extent of the involvement of the non-member in the church was not specified but the inference in the opinion was that it was sufficient to reach the need-to-know plateau. Also, the opinion had to deal with the confidentiality that could be expected from small group counseling. The opinion seemed to indicate little confidentiality could be demanded. The Court expressly noted the participants did not sign a confidentiality agreement. The lesson might be that small group members must expect candor not to be cloaked in confidentiality. In other words, what is revealed in church may not be cloaked by privacy.

CHARITY PAYMENTS DISCRIMINATION

Most churches that terminate an employee, and possibly pay a severance, would not likely continue compensation to even a former ministerial employee. However, due to the distinctly different nature of some hierarchical churches, it can happen as a matter of church polity. In non-hierarchical churches and denominations, it can happen because of sympathy.

In the case of In Re Roman Catholic Diocese of El Paso, Slip Op. (Tex. App. 8^th, 2021), the former clergyman was placed on administrative leave and his “faculty” removed in 1999. In other words, the clergyman was no longer “licensed” to perform clerical duties. The clergyman was paid monthly payments that church cannon law named “decent support.” The payments and administrative leave arose from a criminal charge that was later dismissed. In 2016, the church reduced the monthly payments by 44%. Even though the church issued a W2 and sometimes referred to the monthly payment as “payroll,” the Court held the payment was governed by canon law, was classified as charity by canon law, and was under the discretion of the presiding bishop as to amount. There was no employment contract between the former clergyman and the church. The former clergyman sued and claimed the monthly payment reduction was motivated by age discrimination. The appellate court ordered the trial court to dismiss the case pursuant to the Ecclesiastical Abstention Doctrine. The opinion explored every plausible way in which the claim could be developed and determined that all roads led to a collision with canon law, an area in which the Courts would not intrude.

Termination of a clergyman for most churches does not present viable post-termination non-contractual claims. If the termination itself is outside of the jurisdiction of a court because of the Ministerial Exception or the Ecclesiastical Abstention Doctrine, post-termination events rarely arise. Severance packages and, as in the reported case, a charitable allocation for “decent support,” may form the factual basis for post-termination claims. However, written post-termination severance packages are usually contractual and if all the compensatory terms are met, no plausible claim survives. In any event, if termination is warranted vacillation, no matter how well intended, will prove up the worldly maxim that “no good deed goes unpunished.”

SECULAR ACTS DEFAMATION

In most instances of what might be considered defamatory statements, the Courts will not intrude if the alleged defamation must be judged based on church canon law or doctrine. However, if the alleged defamation may be judged solely under Neutral Principles of Law, a case might proceed.

In Belya v Metropolitan Hilarion, Decision and Order (SD NY, 2021), the federal trial court overruled a Motion to Dismiss because the defamation alleged that the written letters seeking confirmation of the Plaintiff’s election as bishop were forged or false. The trial court held that the allegation of forgery could be determined by application of Neutral Principles of Law. Future proceedings in the case might terminate in favor of the defendant or the plaintiff so the underlying facts of the case are yet to be determined. On a Motion to Dismiss, only the sufficiency of the factual allegations of the Complaint are tested. The Ecclesiastical Abstention Doctrine did not appear to the Court as a prohibition of a determination of whether an improper signature or seal resulted in a forgery or whether documents were falsified.

Generally, defamation allegations revolve around pejorative subjective judgments based on canon law, doctrine, or theology by a critic that the target has violated a church tenant. These types of cases require Courts to exceed the boundaries of the Ecclesiastical Abstention Doctrine to determine the truth of the matter and are generally dismissed. The reported case may contain those allegations, too, but the only allegation that was required to make the case viable was the allegation of forgery and falsification of documents. That may also be the only allegation that survives to trial. The more secular an alleged defamation appears, the more likely it would be that a Court might not abstain.

FRAUDULENT CHURCH DEEDS

It has historically been difficult for small churches to obtain mortgage financing. It has been far too easy in the recent era for denominations and very large churches to obtain enormous mortgages. In either case, fraudulent transfers by deed have been used to convert illiquid church assets to cash.

In In Re AME Western Episcopal District, Slip. Op. ____ B.R. ____ (ED Cal., 2021), the federal bankruptcy court heard a motion to dismiss from a creditor as to the mortgage it had funded to the tune of $3.64 million on a local denominational church property which had long paid off its original mortgage. The local church members first learned of the new mortgage when it was declared in default. The local church never received any of the proceeds of the mortgage. The local churches had been instructed to deed their properties to a corporate entity that was not an officially recognized part of the denomination. The properties deeded represented substantially all of the accumulated assets of the local churches. The deeds the local churches signed did not contain the “in trust” restriction required by denominational governing documents. Two officers as required by state statute did not sign the deeds. The deed did not contain an attestation that the church membership approved the transfer of substantially all of its assets. As a result, the creditor’s motion to dismiss was overruled because the Court held it was on notice by the irregularities in the deed that there was a prior interest, that of the local church, that was not properly conveyed. Further, the local church still worshipped at the church property, unaware of the mortgage, and the notice of the inappropriate deed would have led to a duly diligent review by the lender prior to the loan of the interest of the congregation that worshipped there. A creditor, or lender, on notice that the current owner may not own or some or all of the interest represented in the deed, could face a claim of rescission or other claims.

Not every state will have the requirements that apply to transfers of property that constitutes substantially all of the assets of a non-profit corporation such as a church like that reported herein. However, even in states with lesser requirements, the governing documents of the denomination and the local church can set the same requirements. A creditor or lender may have a difficult time claiming ignorance of the authority of the signatory on a deed or contract. Most legitimate creditors or lenders at a minimum will require a resolution of the governing board of the local church attested by the corporate secretary under oath to engage in any major transaction or mortgage.