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.

ONE LESS RISK FROM GOVERNMENT MONEY

Non-profit organizations that take federal or state funds usually must abide with governmental rules for use of the money, and sometimes other rules as well.  Church schools are the most prone to government intrusion if their funding is in part or in whole from government sources.  However, there are limits to the power of government money to compel submission by churches and denominations.

In Rutland v Nelson, Slip Op., Per Curiam (11th Cir. 2021), the federal appellate court affirmed dismissal of a case by a federal Florida trial court.  The Plaintiff was by church and denominational disciplinary proceedings banned from all church property and from speaking to the denomination’s clergy.  The federal trial court held that the Ecclesiastical Abstention Doctrine of the First Amendment barred judicial intrusion into church disciplinary proceedings and dismissed the case.  On appeal, the Plaintiff argued that because the denomination accepted federal funds, it was subject to judicial review of his complaints discrimination based on “disability, veteran status, and religion.”  The United States Court of Appeals for the 11th Circuit rejected that as a basis for shrinking or terminating First Amendment protection or expanding judicial authority.

At least for now, taking government money is not automatically a key to the church doors.

PLAGUE AND PANDEMIC PROSECUTIONS

The question of whether First Amendment freedoms of assembly and worship should be or can be suspended during a pandemic was answered.  See, Roman Catholic Diocese of Brooklyn v Cuomo, 592 US, ___, 2020 WL 6948354 (Nov. 25, 2020) (houses of worship regulated differently from department stores, schools and factories) and Robinson v Murphy, 592 US ___ (Dec. 15, 2020).  “In recent months, certain other Governors have issued similar edicts.  At the flick of a pen, they have asserted the right to privilege restaurants, marijuana dispensaries, and casinos over churches, mosques, and temples.  See Calvary Chapel Dayton Valley v Sisolak, 591 US ___ (2020) (Gorsuch, J. dissenting).”  Cuomo, Dissent at 2.  Or, …was it answered?

In Solid Rock Baptist Church v New Jersey, Opinion (D. NJ 2021), New Jersey banned gatherings indoors of more than ten people regardless of social distancing, masking, or temperature tests in March 2020.  The Plaintiffs sued seeking the executive order enacting the ban be held unconstitutional and enjoined.  The ban was altered as new executive orders were issued and finally terminated in June 2020.  While effective, the Plaintiffs were prosecuted in state court for violating the bans.  The Plaintiffs claimed that they restricted seating, numbers, required masks and took the temperature of congregants that had to have reservations to enter.  The federal trial court dismissed the case.  The federal trial court held the Plaintiff’s claims were moot because the complained of ban on indoor worship had been repealed by the state.  The court also held it was not likely the state would repeat the unconstitutional behavior in the light of the Supreme Court decisions reference above.  Indeed, the trial court held “[m]oreover, given the precedent set by recent Supreme Court decisions on pandemic-related restrictions, the law no longer provides [the State] a mechanism to repeat the alleged harm” (internal quotation marks and citations omitted).  The trial court refused to consider constitutionality because of pending criminal charges (under the Younger doctrine, a doctrine that prevents federal courts from intervening in state criminal cases absent extra-ordinary circumstances).

The actions of many states hampering church activities but not secular economic activities is a harbinger that churches should not ignore.  First Amendment rights are fragile and government has no compunction about overruling them.  Economic turmoil or political turmoil will cause as much fear and panic as do plagues and pandemics.  Churches that did not have a presence on the internet and the capability to conduct their activities virtually might be snuffed out of existence next time…and there will be a next time.  Moreover, churches are often completely disconnected from their local governments where they might actually have some influence.  Church members and pastors rarely know the local officials at all.  It will be the local elected city council by their police force, or the county Sheriff, that will come to padlock the doors or ticket (or arrest) attendees and pastors, not the White House or even the Governor’s Mansion.  City police and a county prosecutor initiated the prosecutions in the reported case, as a case in point.

CHURCH POLICIES AND PROCEDURES AS A BASIS FOR FRAUD CLAIMS

In our report immediately prior to this one, the allegation in the case reported was that breach of the policies of the denomination or church by the church was a tort compensable in damages.  Generally, tort claims are “wrongful acts” that are committed negligently.  Intentional torts are generally those wrongful acts that are intentionally undertaken with the intent to injure, financially or physically, the damaged claimant.

In John Doe v Roman Catholic Diocese of Dallas, Slip Op. (Tex. Civ. App. 2021) the Plaintiff’s claim was that the Defendant committed “fraud by not following its internal policies for responding to sexual abuse after he reported he was sexually abused… .”  The trial court held that the internal policies for responding to sexual abuse were “so integrally related to …dogma that it comprises part of the … religious representations, beliefs and teachings.”  Therefore, the trial court dismissed the claim pursuant to the Ecclesiastical Abstention Doctrine.  The appellate court affirmed the trial court.  The appellate court held that an inquiry into whether the church violated its own policies “necessarily [required a] reach behind the ecclesiastical curtain.”  The appellate court held that an allegation that the church violated its own policy by mishandling its internal investigation of the allegation was such an inquiry.  The appellate court held that the allegation that the church violated its own policy by misinforming congregants of the investigation or its outcome was such a claim.

Internal church governance, its practices and procedures, are often of late the subject of claims.  The damages claimed range from defamation to failure to protect from a sexual predator.  There is no credible doubt that policies, practices and procedures of churches and denominations are driven by or drafted in conformity with religious beliefs.  Therefore, interpretation and compliance by a church or denomination with its policies or procedures will be driven by the same religious beliefs.  Nevertheless, churches and denominations should not consider the ecclesiastical barrier impenetrable.  Mandatory child sexual abuse reporting statutes in most states, for example, may not tolerate contrary church policies and procedures.  In any event, major decisions by leadership that are driven by church policies and procedures, especially those derived from religious beliefs, should be documented and the applicable policy or procedure annotated in the documentation.