Category: Uncategorized

YOU CAN’T FIGHT CITY HALL – OR THE BANK

A church split of “longstanding” resulted at the end in an interpleader action brought by a bank. The bank paid the proceeds of the church accounts into the registry of the court. For the interpleader action, the bank sought attorney fees, expenses, and a reservation of some of the proceeds (and maybe all of the remainder to be reserved) for future legal expenses. One of the parties objected and alleged the bank was not an impartial stakeholder, and counterclaimed against the bank. However, the court awarded legal fees and expenses to the bank. Bank of America, NA v Jericho Baptist Church Ministries, Inc., Memorandum Opinion, (D. Maryland 2017).

A short Memorandum Opinion of this type does not usually contain detailed recitations of facts. Thus, the actual fury of the church split was not detailed. Resolution of the church split by the court, if the court did so, is not detailed in this opinion.

The only lesson that should starkly leap from the opinion is that a church split that results in litigation will not stay between the parties and will lead to legal expenses of substantial amounts in many instances. Certainly, if the dispute forces a bank to choose sides, it will usually not do so and will usually ask a court to resolve its role. If the parties resist, the bank will seek and typically obtain legal fees and expenses. Although typically interpleader legal fee awards are modest, as such things go, but often they are not the only awards of legal fees possible.

ARTFUL PLEADING BE IT NOT ARTFUL DODGING

Some courts, it is true, will put a Plaintiff’s Petition or Complaint under a microscope and search for a phrase that might constitute a claim that can be adjudicated in a civil court. Artful pleading, accidental or creative, should not be the standard for stating a cause of action, i.e., pleading a claim that can stay in court. The “substance and effect of plaintiff’s claims” should be the standard.

In Speller v Saint Stephen Lutheran, Slip Op. (Mich. App. 2017) (Per Curiam) (unpublished), the appellate court tracked through each theory of recovery alleged by Plaintiff, apparently as had the trial court, to affirm the trial court’s summary judgment dismissing the Plaintiff’s case. The Plaintiff alleged that through “wrongful conduct” the defendants were ousting him as pastor of St. Stephen’s and impairing or revoking his credentials in the denomination. The Plaintiff alleged that the church:

→violated its own constitution and bylaws;

→the constitution and bylaws constituted an employment contract with the pastor that the church directors violated;

→no notice to church members of consideration of termination of the pastor;

→acted without a vote of the membership;

→church directors breached their “fiduciary duty;”

→defamation in internal church letters (which included allegations of “dependence on prescription pain killers” and a lack of candor about it);

→fraud and misrepresentation;

→false light invasion of privacy;

→defamation in letters sent to third parties such as the denomination; and

→intentional infliction of emotional distress.

The Michigan court swept all of these theories of recovery aside because to adjudicate these claims would require “matters of ecclesiastical polity.”

The harder cases are those that do not involve pastors or involve only parachurch organizations. Also, many courts will not “work through” a multiplicity of theories of recovery, due to tedium, resource limitations, or rules precluding it. Nevertheless, a court that takes a “substance and effect of plaintiff’s claims” approach seems more likely to recognize the Ecclesiastical Abstention Doctrine’s limitation on the court’s jurisdiction early enough in proceedings to save the defendant, and maybe all parties, substantial legal fees.

INSURANCE CLAIMS – THE LEGAL MINEFIELD

One of the axioms that govern lawsuits is that litigating about litigating is almost always the best first strategic move by the defense. It is almost always the Plaintiff in a lawsuit that has suffered some loss and then to recover the loss legal fees and expenses must be paid. This has the impact of deepening the loss without certainty of recovery. Also, litigation choices, which are almost always at best guesses about future events in a case, e.g., whether this expert witness will persuade when another might not, or whether a witness will give reliable trial testimony or whether a deposition should be taken to reduce that uncertainty, will drive the cost but not always the outcome.

An example of this is Ministerio Evangelistico International v United Specialty Insurance Company, Slip Op. (SD FL, Miami Div., 2017). Ministerio endured water damage from a roof leak and could not reach an accord with its insurance carrier. The opinion does not disclose the reason for the dispute but a reasonable speculation might be that the insurance carrier thought a neglected maintenance issue was the culprit rather than roof damage from a casualty loss. Regardless, Ministerio sued but sought a declaratory judgment, a declaration of rights under the policy, rather than merely a breach of contract claim or a bad faith claim. The insurance carrier moved to dismiss the declaratory judgment claim, only one of two claims the church had, and the court dismissed it. The case continued as a breach of contract claim but Ministerio likely incurred legal fees resisting the carrier’s motion to dismiss the declaratory judgment claim. The case started in state court at the end of 2015 and by April 2017 had only reached the Answer stage, meaning a year and a quarter passed. Many federal courts in the United States can still bring a case to conclusion in that amount of time.

The longer a case lasts, higher legal fees, higher expenses, and greater fatigue are often the result. Insurance carriers, however, because litigating risk is part of their business model and part of their cost of doing business, are less sensitive to such fatigue than would be a church. Thus, a lesson from this case is that church litigants should be focused and not scattershot in their lawsuits to avoid, if possible, the trap of litigating about litigating. Indeed, in this case, after a year of litigating about litigating, the case is not over but is barely under way.

MANDATORY REPORTING LAWS – ALL OF THEM

The National Center for the Prosecution of Child Abuse of the National District Attorneys Association updates periodically a document entitled State Laws Regarding Mandated Reporting of Child Abuse. The latest version on their website is current through September 2016 and lists the statutes in effect in all fifty states. This is very handy for church lawyers.

Also, on the NDAA website is the Clergy Communications and Clergy as Mandated Reporters document last updated January 2012. This is equally valuable for church lawyers considering clergy confidentiality, clergy privilege and penitent privilege. A quick reading of this document well convinces that this is still a mine field, especially in light of the reporting statutes, which do not always expressly explain how these privileges should be weighed against the duty to report, or if they can be weighed at all under the law.

These very valuable resources should be used with caution. The march of time is relentless in these areas. Also, these documents were created by lawyers for lawyers. These issues are not simple and counsel should be engaged to assist if a church leader finds that such an issue has arisen.