Category: Parachurch Organizations

BY-LAWS AMENDMENTS

As denominations and even churches grow in economic reach sometimes they will spawn non-profit corporations intended to be parachurch organizations. Typically, the mission of the parachurch organization is to achieve a charitable purpose that is part of the mission of the church or denomination. However, the church or denomination usually wishes to retain some control over the parachurch organization and its assets to assure that the church or denominational charitable goals are met. Also, control is sought such that when the mission has been fulfilled, or changes, the assets revert to the church or denomination. Sometimes the economic efficiency gained by creation of the parachurch organization is lost due to changes in society. What was once strictly charitable might be provided by for-profit entities that previously did not exist. The solution may be liquidation of the parachurch organization and redistribution of its assets to other parachurch organizations or reversion. The solution may require, however, that economic efficiency be improved by merger. In order to achieve a merger, a parachurch organization may need to be restructured so that it no longer is part of the church or denomination.

In Episcopal Church Diocese of California v Episcopal Senior Communities, Slip Op. (Cal. App. 2020), the parachurch organization to maintain economic viability needed to merge with another non-profit not affiliated with the parent denomination. The merger considered was not consummated for several years. One of the efforts manifested in a side agreement entered into that purported to allow the parachurch organization to make changes to its bylaws so as to effectuate a future merger. Unfortunately, the side agreement required the parachurch organization’s board of directors to be composed of a majority of members drawn from the denomination. But, the bylaws permitted amendment by “super majority” vote. Thus, the two governing documents would be in conflict if a super majority voted to amend to eliminate the requirement of a denominational majority on the board. The litigation resulted because that was exactly what happened. The denomination expended 147 pages of briefing and the appellate court ruled in 48 pages. The appellate court resolved the clash of the documents by affirming the decision to permit the bylaws amendment eliminating the required denominational majority on the board.

The power to amend bylaws by a parachurch organization must be carefully prescribed by the church or denomination. Such restrictions on the power to amend should not be lifted without considerable consideration of possible outcomes. In order to survive, and especially to avoid reversion of assets to the church or denomination in a liquidation, parachurch organizations may seek to amend their bylaws to eliminate reversionary clauses or governance clauses. The will to survive economically or to achieve the charitable purpose even if it can no longer be achieved using only church or denomination resources, or driven by the needs of parachurch organization officers to retain employment, may override loyalty to a church or denomination.

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.

CHURCH LITIGATION DISCOVERY: CONFESSIONAL PRIVILEGE AND DAUBERT SCREENING

The most expensive components of a lawsuit revolve around the briefing phases necessitated by motions, discovery and discovery disputes, and trial. Discovery, which includes written questions under oath in the form of interrogatories and written depositions, actual forensic depositions before court reporters, and document searches and production. In church litigation, due to First Amendment issues briefing is usually the predominate expense. Also, the matters at issue are often non-economic, or economically fragile, and the parties quickly reach financial exhaustion. Financial exhaustion can cause abandonment of even a good claim and certainly makes non-economic claims, battles over principal, increasingly less attractive. One of the cost elements may be that the money spent on an expert witness may not result in useable testimony. FRCP Rule 702, sometimes referred to as a Daubert challenge because of the case from which the modern application of the rule for the most part emerged, requires a court to act as a gatekeeper to preclude “junk science” and opinions without material basis from contaminating the trial.

In Stevens v Brigham Young University – Idaho, Memorandum Decision and Order (D. Idaho, September 24, 2019), the federal trial court issued another decision regarding discovery disputes. In our May 4, 2019 post we reported the court’s decision regarding certain discovery disputes which included: whether the denomination and the church university had a common interest attorney client privilege, the university’s demand for a psychiatric examination of the Plaintiff because of her claim of emotional injury, and the university’s demand the Plaintiff waive the priest – penitent privilege. In May the court did not find evidence of a common interest, permitted the psychiatric examination, and refused to abate the priest – penitent privilege. In the September order, the court held the denomination, which was a third-party intervenor and not the defendant, was still subject to discovery. In a role reversal, instead of protecting her priest – penitent privilege, the Plaintiff waived it to force “an ecclesiastical leader” of the denomination to answer deposition questions but the denomination sought to impose it to bar the deposition. The Court held the priest – penitent privilege in this situation could only be imposed by the penitent, the Plaintiff, and not the church denomination. The Plaintiff demanded to know the precise amount of financial support the university received from the denomination, but this request was denied by the Court because the university and the denomination stipulated the denomination would pay any judgment against the university making precise answers irrelevant. However, the Court did order the denomination to produce copies of notices to church members of the denomination’s financial support to the university. Also, a friend and confidant of the Plaintiff was prepared for deposition by the denomination and university and they also apparently selected and paid for the friend’s lawyer. The Plaintiff sought discovery of the engagement of the lawyer and the source of funds to pay the lawyer, both of which the Court permitted for whatever impeachment value it might have. Plaintiff’s expert was also vetted by the Court and the expert’s testimony limited to his studies of the denomination’s hierarchal structure. The expert was prohibited from issuing an opinion in Court testimony that the hierarchal structure of the denomination, or its religious teachings, caused the Plaintiff to be sexually manipulated and abused by a university professor. Though this is our second report on this case, it does not appear to be at an end.

The lesson for denominations is that intervention in litigation in which a subordinate church or parachurch organization is a party may subject the denomination to the broader discovery permitted against parties. Also, the Court was applying the newest version of the federal priest – penitent privilege, which can only be asserted by the priest on behalf of the penitent but not on behalf of the priest. Further clash with certain denominations can be expected. The last lesson is about expensive experts in church litigation. Even if they are allowed to report on studies the expert conducted or wrote about the denominational structure or polity, making the inferential leap to causation of the specific harm alleged will likely be deemed speculative or not within the scope of the expert’s credentials.