Tag: church arbitration

CESSATION OF CHURCH ARBITRATION CLAUSES

Few churches use arbitration clauses in membership agreements, or even have formal membership agreements. In the private business sector, an arbitration agreement remains in effect in perpetuity regarding claims arising during the tenure of the contract between the parties. Events after the termination or expiration of the contract would not be subject to most arbitration provisions in most contracts. Efforts to bootstrap an arbitration clause to events arising after contract termination are generally unsuccessful because the agreement to arbitrate terminated with the contract.

In Bixler v Superior Court, Slip Op. (Cal. App. 2022), the church Defendants moved for an order compelling arbitration of the Plaintiff’s court claims. The trial court refused to order arbitration because the claims allegedly arose after the Plaintiffs terminated their membership in the church. The plaintiffs claimed that the church engaged in stalking and other acts of defamation and vandalism to terrorize the Plaintiffs. The Plaintiffs alleged the church was attempting to silence the Plaintiffs to end their claims of sexual misconduct by other members. The appellate court affirmed and held that the Constitutional right of freedom of religion encompassed the right to leave a religion and otherwise extinguish church membership. Once membership was extinguished, the contract for religious services was terminated. The arbitration clause did not survive the termination of the contract. Further, the arbitration clause while potentially enforceable in perpetuity as to events during the membership of the members, was not enforceable as to events after termination of the contract by termination of the church membership. The case was remanded for further proceedings in court.

Churches may wish to use arbitration agreements with their own service providers or with persons to whom they provide services, such as day care, schools and other parachurch activities. But, events arising after the termination of the relationship will not be subject to the arbitration provision.

MANDATORY CHURCH DISPUTE ARBITRATION

The United States Arbitration Act, and the arbitration statutes of each state, may require arbitration between two parties that have voluntarily agreed to arbitrate. Generally, a written contract between the two parties suffices to prove the voluntary agreement to arbitrate. In rare cases, a party seeking to be a third party beneficiary under a contract may be required to arbitrate as if they voluntarily agreed to do so because to take the benefit of a contract usually means consent to all terms. However, voluntary agreement usually cannot be inferred.

In Harbor Christian Fellowship v Southern California District Council of the Assemblies of God, Slip Op. (CA App., 2019) (unpublished) the appellate court reversed the trial court’s order compelling arbitration and vacated the arbitration award in favor of the denomination. The dispute arose because the local church property was deeded by the District Council to itself by quitclaim deed as part of the financial salvage operation necessitated because the local church fell on hard times. The trial court held that the local churches’ participation as an “affiliate” of the District Council constituted acquiescence to the bylaws of the District Council. The District Council bylaws contained a mandatory arbitration provision. However, the appellate court rejected participation as an “affiliate” alone as proof of submission to the bylaws or voluntary agreement to arbitrate. The trial court did not examine the bylaws of the local church. The appellate court held the local church bylaws adopted in 1955 explicitly defined it as a “cooperative fellowship” in contradiction to the bylaws of the District Council. The appellate court noted the District Council did not put forward any other document proving the local church agreed to be bound by the bylaws of the District Council.

The problem with the decision reported is that the courts, both at the trial and appellate level, interfered in church governance contrary to the Ecclesiastical Abstention Doctrine. The trial court interfered by compelling the local church to arbitrate with the denomination. The denomination should have been required to enforce its own arbitration provision by the internal means available to it even if that was only harsh scolding. The appellate court did exactly the same thing in reverse by deciding that a “cooperative fellowship,” as that term is used by the denomination, meant something different than “affiliate” of the District Council in order to vacate the arbitration decision. Both courts should have decided only whether the quitclaim deed was valid or invalid on its face just like any other quitclaim deed in dispute. Either the denomination could prove its authorization using Neutral Principals of Law to file the quitclaim deed or it could not. The arbitration and its outcome were irrelevant.

THE FINAL JUDGMENT, AGAIN

Increasingly, it seems, in civil litigation, following a similar trajectory in criminal law, there is no closure. Church litigation is increasingly no exception.

In September 2017 and then in December 2017, federal court and state court opinions in Patterson v Shelton, were reported herein. See the post, And Then Again, Maybe Not. In 1991, the founder and pastor of the church died. The power struggle that ensued was the stuff of legends, dueling and feuding, that is. It resulted in published appellate opinions in 2013 and 2017: 175 A3d 442 (Pa. Cmwlth. 2017); 78 A3d 1092 (PA. 2013). The first conflict involved the struggle to determine who was in charge. The second wave involved the conclusions of a forensic accounting investigator that hundreds of thousands of dollars were misappropriated by the church leadership that succeeded the founder. The third wave involved an arbitration decision in 2006 in which the arbitrator was persuaded by the forensic auditor and appointed a receiver to recover the assets of the church. The appellate court overturned the arbitration award concluding the arbitrator went beyond the scope of contractual authority in fashioning relief. See, 942 A2d 967 (Pa. Cmwlth. 2008). The fourth wave of litigation was the claim that Patterson was not a church leader but merely a member and did not have standing under the not for profit corporations statute to bring the claims. The appellate court overruled the trial court and held as a church member and beneficiary of the not for profit corporation, the church, Patterson had sufficient standing to bring claims. The fifth wave was marked by a bench trial regarding the claims conducted in 2014. The trial court concluded it did not have jurisdiction under the Ecclesiastical Abstention Doctrine of the First Amendment and dismissed the case. That had the effect of leaving the arbitration award as the last determination because the trial court, in effect, held that every decision made thereafter lacked jurisdiction. In the sixth and latest wave of Patterson v Shelton, the trial court was asked to strike its orders enforcing the arbitration award as the final judgment. The trial court declined. The appellate court affirmed.

One reason this litigation became so protracted was that the courts made two errors. The courts did not inquire into their own jurisdiction and its limits early in proceedings. The other was to allow judicial hostility to arbitration to again raise its long discredited visage. Arbitrations are no more or less effectual as dispute resolution mechanisms than jury trials. While judges may have greater experience than arbitration panels in dispute resolution, which in some cases would make a bench trial a better forum, the routine case does not benefit from such experience enough to invalidate the arbitral forum. Only arbitral forums that are either so expensive or so without procedural safeguards that their decision making is suspect are inferior in the typical routine case. However, if the parties contractually selected the forum, it should be assumed both sides knew the costs and the risks. If an arbitrator’s awarded relief seems to exceed the contractual grant of authority, the better practice is to either judicially revise the relief given or to remand to the arbitrator for the revision. Simply vacating the award leads to a quagmire.

DENOMINATIONAL CHURCH ARBITRATION

There are few reported examples of denominational church arbitration that allow study of the process or its purposes. Also, most denominational arbitration systems are still infantile in their development and operation. A few are beginning to mimic the highly developed American Arbitration Association or the Financial Industry Regulatory Authority (“FINRA,” formerly “NASD” and formerly “NYSE”) arbitral forums. Denominational church arbitration is reported so rarely, and probably conducted so rarely, that evaluation of process or results is problematic.

In Garcia v Church of Scientology, Order, (MD FL, Tampa Div., 2018) the United States District Court dismissed the case challenging an arbitral award against the Plaintiffs. The Plaintiffs submitted an arbitration claim to retrieve hundreds of thousands of dollars in donations in two programs of the church the plaintiffs claimed were fraudulently misrepresented. The Plaintiffs challenged the arbitral award on United States Arbitration Act grounds including “evident partiality” and misconduct of arbitrators. The plaintiffs claimed witnesses and documentary exhibits were not heard or reviewed by the arbitrators, the arbitral forum held ex parte meetings with the arbitrators, and the arbitral forum edited or redacted exhibits submitted to the arbitrators. They also claimed their counsel was not allowed to attend, however, the Court determined the record reflected Counsel would have been allowed to attend but would not have been allowed to participate. Considering the challenge in light of the limited review possible under the United States Arbitration Act and the Ecclesiastical Abstention Doctrine, the Court found no sustainable grounds for the challenge. The Court held the Plaintiffs agreed to arbitration, agreed to proceed in arbitration and were bound by church arbitral rules and procedures which included much about which they complained.

Arbitrators as a herd try to do the right thing usually regardless of the procedural niceties imposed by the arbitral forum. However, arbitrators are usually selected because they are in some way allied with the arbitral forum or its sponsors. That is true in commercial arbitration so it should not be a surprise that denominational church arbitrators would be closely aligned with the church denomination. That does not mean the arbitration cannot be fair because sympathy will only go so far. In most arbitrations, it does not play a determinative role because all adverse litigating parties are also aligned with the arbitral forum in some way. If the damages claim presented by the claimant, in commercial or church arbitration, requires a negative interpretation of facts otherwise innocent, such as fund-raising marketing representations as in the case reported herein, the case will be weak at best. Hard facts showing fraud designed and directed especially at a vulnerable plaintiff would be required. Also, if counsel is allowed to attend but not participate, or not allowed to attend, then the arbitration is probably not worth the effort or cost. Most claimants lack sufficient training in advocacy in a litigation setting to represent themselves much less the emotional objectivity needed to put forward successful arguments. Pro Se plaintiffs and claimants get lost in the weeds, do not know when to throw back the little ones, and do not know the decisional paradigm or standards of the arbitral forum well enough to know which parts of their case are important.