Author: churchlitigationupdate

REPORT 200: PUPIL CONTRACTS AND HANDBOOKS

[This is 200th report issued on this website. There does not seem to be an abatement of church lawsuits looming in the future.]

Most church schools have adopted handbooks that state the school’s policies, disciplinary and otherwise. Typically, the pupil’s parents, as well as the pupil, sign an acknowledgement agreement to conform. The acknowledgement usually warns that suspension and expulsion are real risks of violations. While the pupil cannot, as a minor, be bound contractually, the parents can be in most jurisdictions.

In St. Brendan High School, Inc. v Neff, Slip Op. (FL App 3d, 2019) the appellate court refused to prohibit the trial court from proceeding on the parents’ claim that expulsion violated the contract entered into upon enrollment. The school expelled the student because on her behalf the parents sued the school because the student was injured during “community service” at a location approved by the school. The handbook expressly prohibited lawsuits against the school and warned that expulsion would result. The parents and the student had previously signed the acknowledgement of the handbook containing the prohibition. The appellate court found that the parents’ lawsuit claims “fall on the secular / contractual side” and not in contravention of Florida’s interpretation of the Ecclesiastical Abstention Doctrine. Because such a writ is an “extraordinary remedy” not often granted, the outcome of the lawsuit remained uncertain.

Because the opinion reported did not quote the handbook in detail, whether the policy prohibiting lawsuits against the school was based on religious doctrine, such as Matthew 18, for example, or denominational governance documents was not discernible. Such a prohibition would need to be based on religious doctrine in order to qualify for Ecclesiastical Abstention. Whether the handbook prohibition and the signed acknowledgment under Florida law would be a form of waiver or contractual limitation on litigation choices, like an arbitration clause, could not be gleaned from the opinion. Waiver language might be more effective than prohibition language in some jurisdictions.

CHURCH MEMBERS IN CHURCH BANKRUPTICIES

If a church slides into bankruptcy and decides to sell assets to extricate itself, are the members of the church entitled to be heard? Or, are the church members like common stock shareholders and simply along for the ride?

The federal bankruptcy court hearing In re: Sindesmos Hellinikes-Kinotitos of Chicago, Debtor, Memorandum Decision (ND ILL, ED, Bankr., 2019) faced a motion by church members to void an approved sale of real property made by church leadership to satisfy secured creditors. In order to have standing to challenge the authority of church leadership to approve the sale of property, the church members had to show (1) the church intended to vest in church members “a property right sufficient to require service” required by the bankruptcy code and (2) “sufficient to create a pecuniary interest in the outcome of the sale.” To determine if the church intended to create property rights in church members could have required the Court to “probe into the allocation of power within the church.” The Court declined to make that dive but rather relied on state law that determined the “trustees” of a church had the authority to dispose of church assets. The Court noted that the church members may have had the right to challenge the leadership’s decision to sell by invoking “Dispute Resolution Procedures” set forth in the denominational governance documents but did not do so. Because of the absence of a property right conferred by the church on its church members, the church as debtor had no duty to provide notice. In any event, the bankruptcy in question was high profile and reported in the national news because it involved the financial failure of a venerable church, which the Court noted, too.

It seems rather likely that if church members could not prevent the financial failure of their church in the first instance, they would have no unsatisfied property right to assert to stop foreclosures and asset sales. Moreover, church members attempts to engage meaningfully in the bankruptcy proceedings will likely be too late if they did not engage meaningfully before, especially if the opportunity to intervene was well documented. In most foreclosures it would be. In any event, church members will have to demonstrate a property interest greater than that of a common stock shareholder in order to have a seat at the bankruptcy table.

TORTIOUS INTERFERENCE WITH CHURCH CONTRACTS

As lawsuits become more acceptable to churches as a means of enforcing their rights among themselves, secular legal theories are more often asserted. In struggles between denominations and their local churches or parachurch organizations, there are often contracts about which one or all parties will allege a breach of contract. Less often but becoming more common is the claim that a religious organization interfered with a contract.

In Samara Iglesia Evangelica, Inc. v Lorenzo, Order on Cross Motions for Summary Judgment and Motion to Strike (D Mass., 2019) the federal trial court sorted out a struggle between a denomination and its local church and the local church pastors. The denomination alleged the local church pastors were contractually bound not to alienate the property of the local church without authorization. When the local church and its pastors decided to terminate their relationship with the denomination, they transferred the property from the local church to a new church unaffiliated with the denomination. However, unlike more established denominations, the deed only named the local church as the owner which allowed the local church to transfer the deed to the new church without hinderance. Also, the governing documents of the local church did not grant the denomination any rights in the local church governance or property. The contracts with the local pastors, however, stated no definite duration which made the contracts terminable at will by either party. The local pastors resigned from the contracts. Those resignations terminated the contracts leaving no contract with which to interfere tortuously or otherwise.

From the denomination’s perspective, the error made was the failure to engage counsel to amend and update local church governing documents and deeds as well as denominational governing documents since the 1970s. The law has changed substantially since then. Also, religious promissory language is generally not enforceable in a court in the United States. Explicit contractual promises must be made, typically in writing signed by all parties. The employment contracts of pastors must be of a definite duration even if they automatically renew for a new term if not terminated at the anniversary date, or they will be “at will” employment contracts in most states. Venue and applicable selection clauses will prevent legal battles from always being fought in the location of the local church rather than in the location of the denominational headquarters.

SPIRITUAL INFORMATION SPECIALISTS

We have reported on opinions of the United States Courts of Appeals that focus on the struggle to determine when a religious organization employee is sufficiently religious that it makes the employer immune from an employment claim brought pursuant to a federal discrimination statute. These cases struggle with whether an employee is sufficiently ministerial in their duties to trigger the Ministerial Exception. From the United States Supreme Court came a four element test to apply to determine the applicability of the Ministerial Exception: “formal title;” the “substance of the title;” the employee’s “use of the title;” and the employee’s “religious functions.” Hosanna-Tabor Evangelical Lutheran Church and School v EEOC, 565 US 171, 188-89 (2012). The struggle comes about when an employer can prove only one or two of the tests apply. The ultimate implication is that some religious employers may have to compromise or abandon their beliefs to avoid interference from the federal discrimination laws.

In Hutson v Concord Christian School, Memorandum Opinion (ED Tenn. 2019), the federal trial court granted summary judgment to the school that terminated an elementary school teacher because she was pregnant out of wed lock. Setting aside religious or moral arguments, the question the Court answered was whether an elementary school teacher’s position was sufficiently religious to trigger the Ministerial Exception and shield the religious employer behind the First Amendment. The first factor, title, weighed against the school because “elementary school teacher” was not religious. But, because the school’s policies, handbook, and many other documents confirmed the elementary school teacher was supposed to perform, too, as an evangelist, religion teacher, and be “called” to the role, the second element, “substance” weighed in favor of the school. The third element, use of the title by the Plaintiff, weighed against the school because there was no evidence Plaintiff considered or called herself a “minister.” The fourth element, called the “key factor” by the Court, weighed in favor of the school because the teacher’s function included leading devotions and teaching Bible lessons. The Court concluded that the second and fourth elements were sufficient to trigger the Ministerial Exception and required dismissal of the federal employment discrimination claims.

The title of this article was taken from the case reported above but may have originated with the religious organization in Conlon v InterVarsity Christian Fellowship, 777 F3d 829, 832 (6th Cir. 2015), which the Court also relied upon. The lesson from these cases may be that the title should match the religious function in school documents and actual practice. Also, the case reported confirms that the handbook, the employment documents, and especially any morals clause, and there should be a morals clause, should track the title and the religious job function. Also, if the termination is factually based on conduct that cannot be tolerated in an elementary school but that occurred with no involvement of the school or its pupils, then a severance and release might be cheaper than litigating to prove a point.