Category: Church Contracts

INDEMNIFICATION OF ATTORNEY FEES

The statutes governing non-profit corporations in some states require that employees or “representatives” be indemnified for legal fees in lawsuits in which they are named because of their title or position in the non-profit.  Such statutes do not apply to personal matters that end up court.  However, even a matter that seems merely personal may be escalated by a Plaintiff searching for a Defendant with more resources than that of an individual.

In Kawimbe v African Methodist Episcopal Church, Inc., Opinion and Order (ND GA, 2021) the federal trial court in Georgia dismissed the Plaintiff’s lawsuit to recover attorney fees.  The Plaintiff was the subject of a disciplinary proceeding in the denomination that resulted in a jury trial.  The jury was composed of ministers of the denomination.  The Plaintiff hired legal counsel to conduct the jury trial and prevailed.  However, the legal fees amounted to $75,000.  The Plaintiff claimed the denomination owed the Plaintiff indemnification for the attorney fees expended defending the internal disciplinary proceeding.  The denomination’s governing document incorporated Pennsylvania law and Plaintiff invoked that state’s non-profit corporation indemnification statute.  The federal trial court, however, held the Ministerial Exception did not apply because indemnification for legal fees can be a matter of contract and decided using Neutral Principles of Law and that the indemnification issue did not implicate hiring or firing of clergy.  But, the federal trial court held that in order to determine if Plaintiff’s cost of defense of the disciplinary proceeding was incurred because of his “representative status,” as a Bishop, an element of the statute, the court would be required to inquire into ecclesiastical matters barred by the Ecclesiastical Abstention Doctrine.  The court held it would have to inquire into the duties of a Bishop, the nature of the disciplinary complaint in reference to the denomination’s governing documents and possibly other inquiries.

Written employment contracts that contain indemnification provisions may allow a court to invoke Neutral Principles of Law and decide whether clergy or non-clergy can recover attorney fees expended in their defense of claims, either internal or external.  Denominational governing documents and local church governing documents sometimes contain indemnification clauses, too, that can likewise be subjected to review under Neutral Principles of Law.  The reason may be that the court can assume the clause has been reconciled with ecclesiastical concerns and would not have been included if there was an ecclesiastical issue, or such an issue would have been stated in the clause.  Generic non-profit corporation statutes may not be as easily applied because no similar assumption can be made.

THE MINISTERIAL EXCEPTION AND EMPLOYMENT CONTRACTS

The Ministerial Exception Doctrine arose from the Ecclesiastical Abstention Doctrine of the First Amendment, in part, and from the statutory exception found in some federal employment laws that exempt religious organizations from the scope of such statutes.  It has been refined most recently by the United States Supreme Court in Our Lady of Guadalupe School v. Morrissey-Berru, 591 US ___ (2020).  The general import of the rule is that churches and parachurch organizations may select their own ministers without interference by regulators or courts.  The question that then followed, as we have explored in many reports, is whether the employee was sufficiently “ministerial.”

In Simon v Saint Dominic Academy, Opinion, (D. NJ 2021), the federal trial court dismissed the case brought by Plaintiff, a “Chairperson of the Religious Department and Campus Minister.”  Based on our prior reports that conclusion seemed obvious enough.  What was less obvious was whether the Plaintiff’s claim, that the written employment contract was breached, could survive the Ministerial Exception.  The federal trial court held that to enforce the written employment contract as to grounds for termination would be prohibited by the Ministerial Exception just as would federal statutory employment claims.  While a compensation or similar covenant might have been enforceable under Neutral Principles of Law, the termination claim could not be.

While every case will turn on its own facts, financial contractual terms are most likely to be judged under Neutral Principles of Law and wrongful termination claims under the Ministerial Exception.  Hopefully, for most church or parachurch employers, and their employees, this distinction is not too subtle to understand.  Recognition of the existence of the distinction might forecast which claims to abandon or defend.

ENFORCEABLE MARRIAGE CONTRACTS

Article I, Clause I, of the United States Constitution elevated contracts above interference by Congress or the states making contracts as cherished and protected as First Amendment freedoms. Sometimes the contracts at issue arise from religious transactions but if the contracts are sufficiently non-religious in language that Neutral Principles of Law can be applied to enforce them courts may do so.

In Nouri v Dadgar, Slip Op. (Maryland App. 2020), in a consolidated case, two Islamic marriage contracts, known as “Mahrs,” contained a clause, sometimes called a “Sadaq,” that required upon divorce the male spouses to immediately pay $608,000 and $492,750 (the value of gold coins and trips set forth in the “Mahrs”), respectively. The purpose of these marriage contracts was to discourage divorce. The appellate court held the “Mahrs” were not against the public policy of Maryland and objectively determinable terms were enforceable. However, the Court remanded the cases to the trial courts to reconsider whether these particular “Mahrs” met the standards for validity of civil contracts, that because the contracts arose in a “confidential relationship” there had to be a determination that the contract was not tainted by overreaching, unequal bargaining power or other inequities. (This summary may not be doing full justice to this very well-reasoned and documented opinion, which was also an excellent short primer on the subject.)

We reported on a Connecticut court opinion from 2019, Tilsen v Benson, Slip Op., 2019 WL 6329065 (Supp. Ct. Conn., 2019), in a post entitled Church Prenuptial Agreements. In Tilsen, the prenuptial Torah based “ketubah” was not deemed enforceable in a civil court because of the Ecclesiastical Abstention Doctrine. The Torah agreement required interpretation by experts in Torah law. In the Maryland case reported above, the “Mahrs” were held to be Islamic marriage contracts and not pre-nuptial agreements.