Key point 9-07. The First Amendment allows civil courts to resolve internal church disputes so long as they can do so without interpreting doctrine or polity.
A Michigan court ruled that the "ecclesiastical abstention doctrine" prevented it from resolving claims arising from a pastor's embezzlement of a large sum of church funds that would involve inquiries into church doctrine or polity.
A church's board of deacons became aware that the pastor of their church had engaged in numerous financial irregularities. When confronted, the pastor admitted that on numerous occasions he gave himself raises, used church credit cards for nonchurch purposes, and paid himself monetary honorariums, all without the board's approval or authorization.
The board hired a CPA firm to examine the church finances. During a Sunday morning worship service, the board informed the congregation of the status of the investigation of both the pastor and the church finances. Following this disclosure, the congregation began to split into factions that either supported or opposed the pastor's continuing employment.
The CPA firm eventually released a preliminary report demonstrating that between 2008 and 2010, more than $237,000 had been removed from the church's bank accounts through questionable transactions. The majority of these transactions were for the benefit of the pastor, his wife, and a former church secretary. Shortly after the release of the report, the board of deacons voted to suspend the pastor with pay. A month later, the local prosecutor's office authorized an arrest warrant for the pastor on one count of embezzlement. The pastor later pleaded nolo contendere (or "no contest") to a charge of embezzling more than $50,000 but less than $100,000 and was ordered to pay restitution.
Some church members continued to support the pastor, and did not believe terminating his services was an appropriate response. This faction elected a new board of deacons, although the existing board continued to function, with each board asserting that the other was invalid.
The church filed a lawsuit in civil court against the pastor and his supporters, seeking monetary damages for the pastor's misappropriation of church funds. The pastor and his supporters filed a counterclaim asserting breach of contract and interference with his employment contract. Alternatively, they insisted that the "ecclesiastical abstention doctrine" deprived the court of the authority to resolve the dispute. This doctrine, which is rooted in the First Amendment guaranty of religious freedom, generally bars the civil courts from resolving internal church disputes over doctrinal or governance issues. The trial court agreed with the pastor and his supporters, and dismissed the lawsuit. The church appealed. A state appeals court began its opinion by noting:
It is well settled that courts, both federal and state, are severely circumscribed by the First and Fourteenth Amendments to the United States Constitution … in the resolution of disputes between a church and its members … . Such jurisdiction is limited to property rights which can be resolved by application of civil law. Whenever the court must stray into questions of religious doctrine or ecclesiastical polity the court loses jurisdiction. Religious doctrine refers to ritual, liturgy of worship and tenets of the faith. Polity refers to organization and form of government of the church. Under the ecclesiastical abstention doctrine … civil courts may not redetermine the correctness of an interpretation of canonical text or some decision relating to government of the religious polity.
The court concluded: "Because determining whether the board of trustees had the authority to suspend and eventually terminate the pastor would require determinations of religious polity, the civil courts do not have jurisdiction. Additionally, the counterclaims brought by the pastor involve the provision of his services as pastor to the church, which is the essence of the church's constitutionally protected function, and any claimed contract for such services likely involves its ecclesiastical policies, outside the purview of civil law."
But the court concluded that the church's demand for monetary damages based on the pastor's misappropriation of church funds could be resolved by the civil courts:
The pleadings for money damages seem to imply conversion as the underlying tort by which the church requests money damages. A claim of conversion against an individual facially does not cause the court to stray into questions of religious doctrine or ecclesiastical polity, which is where the court would lose jurisdiction. Because the claim likely does not require the trial court to determine the issue on the basis of religious doctrine or ecclesiastical polity, the claim is likely not barred by the ecclesiastical abstention doctrine.
What this means for churches
This case is instructive for the following reasons. First, it demonstrates the polarizing effect of criminal activity by church leaders. The fact that the pastor stole a large amount of money from the church, and was criminally charged with one count of embezzlement, did not deter a sizable faction from opposing his ouster.
Second, the pastor's misappropriation of church assets was facilitated by the church's weak internal controls. Internal controls are procedures that are designed to minimize the risk of wrongful use of an organization's assets and funds. Basic internal controls would have prevented the pastor from giving himself unauthorized salary increases and using church credit cards for personal expenses.
Third, it is noteworthy that the church employed a CPA firm to review its finances when it became obvious that irregularities existed. This often is an excellent idea. It is important to have a good idea of how much a church employee embezzled before deciding what to do about it. Typically, embezzlers admit to only a small fraction of what they actually took. See the sidebar, beginning on page 22, that addresses 10 items to consider when confronted with a case of embezzlement. Baptist Church v. Pearson, 872 N.W.2d 16 (Mich. App, 2015).