Tag: neutral principles

NEUTRAL PRINCIPLES V ECCLESIASTICAL PRINCIPLES

While it is true some Courts never find an Ecclesiastical Issue over which to abstain, and some expand Neutral Principles of Law to fill all voids, generally most Courts do not seem to have any trouble with a hands-off approach to church governance. It is true that non-profit corporations in general and churches in particular can be vulnerable to usurpation because of the volunteer nature of their leadership. Thus, there is recognized by some Courts a “fraud or collusion” exception to the church autonomy doctrine.

In Moon v Family Federation for World Peace, Slip Op. (DC Cir., 2022), the ongoing litigation between the widow and two sons of the deceased founder was revitalized when the board of directors of Unification International, Inc. allegedly reconfigured the governing documents to permit donation of half of the assets, about half a billion dollars, of Unification to entities “not affiliated” with Family Federation. We last reported on the litigation between these and affiliated parties on August 3, 2019. The trial court in this instance concluded the Neutral Principles of Law could be deployed and granted summary judgment to Family Federation, directed the board members be personally liable for the assets, and removed from their positions. The Court of Appeals for the DC Circuit reversed the summary judgment, wiping out the judgment against the board members, and remanded for a determination of whether the fraud or collusion exception to the church autonomy doctrine was a viable claim. If the claim survives in the trial court, it may lead to a second judgment.

The failure of the founder to have a firmly structured plan for succession led to years of litigation among the surviving family. Nevertheless, a deceased founders’ intentions and plans may or may not survive the transition to new leadership resulting in restructuring of the surviving entities and relationships. In very rare cases, there may be evidence that the restructuring was not based religious beliefs but rather on self-dealing, fraud and conspiracy.

WHICH BYLAWS?

Churches are typically volunteer organizations with a few paid leaders and usually a greater number of unpaid leaders. Over the years or decades, as people come and go from these positions, without accurate records, identification of the correct and complete version of the governing document in force might become problematic. It can be a crucial question.

In Nation Ford Baptist Church, Inc. v Davis, 2022-NCSC-98 (NC 2022), the trial court and intermediate court of appeals denied the motion to dismiss of the church based on church autonomy grounds and the Ecclesiastical Abstention Doctrine. The pastor was terminated by the church board. The pastor alleged the correct version of the bylaws required a congregational vote and did not authorize the board to act unilaterally. The church alleged that the correct version in effect did give the board unilateral authority to terminate the pastor. The church also alleged the letter agreement employing the pastor expressly stated the employment was “at will.” The pastor alleged the correct version of the bylaws was submitted by the church as an attachment to a bank loan application. The North Carolina Supreme Court affirmed the trial court and intermediate appellate court’s denial of the motion to dismiss by the church as to some theories and not as to others. The search for the correct version of bylaws was held to be an issue that could be resolved applying Neutral Principles of Law. The demand for reinstatement, however, could not be. The effect of the letter agreement was left to the trial court to determine, if it could be, using Neutral Principles of Law.

Churches that periodically, annually or bi-annually, confirm the version of the governing document in effect in their official meeting minutes avoid the scenario in the reported case. Prior versions should in official meeting minutes be officially disavowed as in effect. In the reported case, the Supreme Court noted the allegation that the congregation dwindled in size under the former pastor by 60%.

SECULAR ORGANIZATIONAL DOCUMENTS

The concept of Neutral Principles of Law is founded on the idea that certain documents are not so ecclesiastical in their composition, purpose and usage that courts can resolve certain church related disputes. Typically, those documents are property deeds, church corporate organizational documents required or authorized by a state, and denominational organizational documents. In denominational procedure and policy manuals and handbooks in which the operational rules of the organization are typically published, there may be secular sections that are removed from ecclesiastical issues.

In Re Texas Conference of Seventh Day Adventists, Slip Op. (Tex. Civ. App. 2^nd 2022), the appellate court “allowed” the trial court to dismiss the case for lack of jurisdiction. Texas views the Ecclesiastical Abstention Doctrine as a jurisdictional limitation on the authority and power of Courts to hear cases involving churches. The denomination forced the pastor after a quarter century of service to retire. He continued to serve the local church for five more years. The local church during those years gathered money for the pastor’s pay and transferred the cash to the denomination so the denomination could exercise the payroll function. The denomination terminated the pastor at the end of the five years. The local church did not resist and prepared to wind down the payroll fund and pay the pastor the remaining balance. The denomination ordered the remaining balance transferred to the denomination but paid the pastor nothing further. The local church turned to its savings account to obtain funds to continue operating. The denomination prevented withdrawals from the savings account. The denomination changed the locks on the church property and excluded the local church leaders and members from gathering at the church property. The local church sued the denomination and alleged the denomination violated the secular provisions in the denominational manual that placed ownership of the funds taken and the church property in the ownership of the local church. The appellate court held that the Ecclesiastical Abstention Doctrine does not allow secular issues entangled with ecclesiastical issues, such as church governance and authority, to be heard in Texas courts. The trial court was permitted to dismiss the case.

The opinion does not explain how the denomination came to control the savings account otherwise held by the local church. The denomination apparently ordered the local church financial officer to transfer the payroll fund to the denomination. Therefore, implicitly, the denominational control of the finances of the local church predated the dispute. Local churches that wish to retain some financial autonomy must open their bank accounts in their own ownership and update authorizations periodically. Denominations that wish to avoid local church financial autonomy must require all local church funds be deposited in denominational sweep accounts. The denomination can fund a petty cash account at the local church for basic operational necessities.

THE COLLAPSE OF THE DIKE (In Michigan)

We reported in July 2017 and September 2017 on Winkler v Marist Fathers of Detroit, Inc., Slip Op. (Mich. 2017), an opinion of the Supreme Court of Michigan that was revised. Our posts were entitled: The Finger in the Dike and The Leak in the Dike, respectively. The Supreme Court revised its own prior pronouncements that the Ecclesiastical Abstention Doctrine was jurisdictional and indicated it was not jurisdictional. If a dispute could be decided on neutral principles that did not require an inquiry into ecclesiastical decisions, then the dispute could be resolved by a Michigan court according to the Michigan high court. As we noted when we summarized the decision, the smaller and weaker the Ecclesiastical Abstention Doctrine is defined the more likely it becomes that a court, even a well-meaning one, will simply ignore ecclesiastical sensibilities. Another risk is that churches will be required to comply with laws intended to govern for-profit businesses and local governmental subdivisions, or the rules applicable to public schools, even though churches and church schools have a more fragile financial base.

In Rubinstein v Temple Israel, Slip Op., (Mich. App. 2018), the trial court dismissed the case for lack of jurisdiction. The religious school’s rule that required vaccinations and allowed exemptions only for medical reasons was narrower than state law that also allowed exemption on religious grounds. The trial court reasoned that an inquiry into whether the religious school’s determination that its students would not have religious grounds for refusing vaccinations was ecclesiastical and for that reason the trial court would not have jurisdiction to hear the case. The intermediate appellate court in Michigan, relying on the Michigan Supreme Court decision in Winkler, reversed the trial court because the Ecclesiastical Abstention Doctrine was an affirmative defense and not jurisdictional. In other words, a trial court might determine after discovery, in a summary judgment proceeding or a trial, that neutral principles could not decide the dispute but that the trial court would have jurisdiction to make that determination. Likewise, the trial court could rule that the dispute was not ecclesiastical.

The trial court on remand after the parties spend much more on litigation could hold the religious school cannot determine the religious preferences it will tolerate among its students. The trial court could reason that because a “neutral principle,” a state statute designed to preserve religious choice regarding vaccinations required by public schools, could resolve the dispute it need not make an ecclesiastical inquiry. Of course, one would think that under the First Amendment a religious school need not accommodate religious beliefs that vary from its own, whatever they are, but Michigan courts appear to want to be the final arbiter of those religious disputes.