Author: churchlitigationupdate

THE “BAD MOTIVES” DEFENSE IN THE HIERARCHIAL CHURCH CASE

After a fire destroyed the church building in 2013 and insurance paid $1 million, the denominational authority had to decide whether to rebuild the building.  In order to make the decision, the denomination decided to first test whether the congregation was viable.  The congregation had stopped paying dues to the denomination, stopped attending synods, and stopped obtaining approval of elected board members of the local church.  When the denomination asked the congregation how many dues paying members it had, the congregation could only identify “twenty seven and one half” dues paying members rather than the number required to prove viability, which was fifty.  The Plaintiffs sued to try to stop the denomination from ending the existence of their congregation and seizing the church property and accounts.  St. Cyrillus v Polish National Catholic Church, Inc., Slip Op. (Superior Court, NJ, 2017).

The St. Cyrillus opinion was issued by a New Jersey trial court in which the court granted summary judgment to the denomination based on the reversionary clause in the denominational documents.  (In many states, trial courts do not have staff attorneys and do not write opinions so this opinion represents a rare opportunity.)  It was alleged the denomination in correspondence referred to the St. Cyrillus congregation as that “peruvian congregation.”  The argument was that the reference to nationality or ethnicity was pejorative.  It was argued it showed a “bad motive” by the denomination to reach the decision to close the congregation and gather the assets.  The trial court held the mere mention of the congregation by that label did not in isolation indicate the term was used pejoratively.  In any event, the court held the congregation could not prove it was viable.

There are not many reversionary clause cases extant.  Those that are almost always find the denomination, if the congregation was a member, has the right to exercise the reversionary clause.  The St. Cyrillus congregation was an active member of the denomination from 1937 until 2010 and therefore its membership in the denomination was not effectively contestable.  The denomination tracked the participation of the congregation in synods over several decades.  Correspondence from pastors of the congregation going back forty years demonstrated acknowledgment of membership.  The congregation was incorporated before it joined the denomination but that gap in the documents was insufficient to negate the other abundant evidence.  The lesson regarding the need for quality denominational documents and document retrieval was well made.

AND THEN AGAIN, MAYBE NOT

In a post-dated September 7, 2017, we reviewed a Pennsylvania federal court decision holding the federal court could not enforce an arbitration award reversed by a state appellate court because of a lack of diversity and subject matter jurisdiction.  Patterson v Shelton, 2017 WL 3446885 (ED Penn 2017).  The church split that led to the arbitration award in 2006 and finally to the federal court in 2017 started in 1991.

The story, and the litigation, are not concluded.  In Patterson v Shelton, Slip Op. (PA App, 2017), and apparently in several other proceedings, the Plaintiff challenged the jurisdiction of the courts to reverse the arbitration award.  Finally, the Commonwealth Court of Pennsylvania, an intermediate appellate court, somehow realized the state courts did not have jurisdiction to reverse the arbitration award.  The arbitration contract specifically recited the arbitration would be binding and non-appealable.  Thus, every trial court and appellate ruling after the arbitration award was wiped out and the arbitration award stood as the final decision.  The arbitration award could be reduced to judgment in court and enforced in court.  The opinion does not clearly explain how the prior appellate decision to reverse the arbitration award turned out to be wrong, but recognition of the lack of jurisdiction to reverse the arbitration award was probably the right call.  See, United States Arbitration Act, 9 USC §1, et seq.  Also, Pennsylvania adopted the Uniform Arbitration Act which would require the same result.

Arbitration is a tool like any other in that its best use is in those situations in which a business dispute must be resolved.  In such a dispute it can be very cost effective and very effective.  But, arbitration is typically far more expensive than a court proceeding if the arbitral forum or the arbitrators do not control the proceedings as well as require only modest compensation for their time.  Also, given the high emotions in a church split, like those that fueled more than two decades of litigation in the decision reported above, arbitrators may or may not have sufficient judicial power to govern the proceedings.  Cost-effective arbitration depends on the cooperation of the parties in the discovery process and in emotionally charged cases, like church splits, that cooperation may be in short supply.

BOARD MEMBERSHIP WARS

When a church split spills into the street it is always interesting to see which issue the contestants chose to take into the courthouse.  Typically, the contestants will pick issues that are emotionally charged but which they lack fundamental evidence to substantiate.  Membership roll qualification and verification is usually the most needed but the least well documented in a church split.  The old guard seems to feel the need to prove their voting eligibility the least as if some sort of presumption will carry their claims.  The challengers to the old order usually have the better documentation of membership either because their memberships are the more recent or they planned it that way.

In Queens Branch of the Bhuvaneshwar Mandir, Inc. v Jagraine Sherman, 2017 NY Slip Op 08546 (NY App Div 2nd 2017) the opinion does not indicate which group was the old guard and which was the challenger.  However, the battle for control of the church was settled by an election and the court was asked to confirm the outcome of the election.  The disgruntled party alleged a substantial number of the ballots were cast by persons not qualified to vote or not qualified to be members.  Without discussing specifics, the court concluded there was inadequate proof to support the claim.

Non-existent or poorly documented membership rolls may make a church election impossible to challenge.  The church organizational documents should specify membership eligibility requirements.  The church organizational documents should specify the electoral process.  There should be church organizational documents in the first place, e.g., bylaws.  When a dispute arises it is not uncommon to ask a church to provide the organizational documents only to be told the church cannot determine which version is the latest or whether it is complete, if it can be located at all.

STATUTORY CHARITABLE IMMUNITY

The older eastern states have statutory charitable immunity.  Charities resident in these states are typically not liable for negligence.  However, they can be held liable for gross negligence.  Gross negligence usually arises from reckless conduct or indifference to risk.  Most states west of the Mississippi River do not provide tort immunity to charities.  Readers should not assume their state of residence does so.

In Jack v Calvary Cemetery, Slip Op. (NJ Super. App. 2017), the plaintiff was injured when his walker was caught by a crack in the cement and he fell.  The plaintiff was departing from a funeral conducted by the Catholic Church and the cemetery was owned by the Diocese.  The crack in the cement extended across the parking lot and the court held mere awareness of the crack did not elevate the negligence of the church, if any, to reckless conduct.  The plaintiff pointed out that the corporate governing documents of the diocese did not mention cemeteries as an authorized activity but the court rejected that omission as immaterial.  The cemetery was not found to be a “secular, profit making activity” which would have been outside the scope of the statutory immunity.  The court contrasted it to a bingo game, which was considered outside the statutory immunity even though the profits of the gaming were used for church expenses.  It was also immaterial whether the cemetery was “religious.”  The Catholic funeral rites and service conducted on the premises were sufficient and there was no question the Diocese owned the grounds.

Many churches and para-church organizations own facilities to provide various services.  Profitable church owned or controlled service providers should be carefully and specially insured.  Pastors that lack the background to do such a risk assessment should engage someone other than an insurance salesman to conduct a review.  Insurance carriers sometimes provide a valid review but so too do accounting firms and law firms.  All service providing facilities should be carefully reviewed to confirm that the ecclesiastical nature or governance of the facility is abundantly clear.