Michigan Court Rules United Methodist Church Not A ‘Jural Entity’

A Michigan court ruled the United Methodist Church is not a ‘jural entity’ and cannot be sued for damages stemming from an embezzlement case.

Richard R. Hammar, Attorney, CPA

Bio

State: Michigan
Categories: Denominations - Legal Liability

Key point 10-18.2. Many courts have refused to hold denominational agencies liable for the acts of affiliated ministers and churches, either because of First Amendment considerations or because the relationship between the denominational agency and affiliated church or minister is too remote to support liability.

In a potentially significant ruling, a federal district court in Michigan ruled that the United Methodist Church was not a “jural entity” and therefore could not be sued by a family seeking $12 million in damages from various Methodist agencies as a result of the embezzlement of $360,000 of their funds from church accounts.

An adult male (the plaintiff) is a beneficiary of a multimillion-dollar family trust.

He claimed that an employee of a local Methodist church served as trustee of the trust, and allegedly, with the assistance of the church and its pastor, misappropriated trust funds amounting to $360,000.

He alleged that the trustee would disburse amounts of money from the trust to himself, disguising the payments as charitable contributions, and then using the money for personal gain.

In addition to embezzling money from the trust, the plaintiff claimed that the trustee failed to maintain adequate financial statements and transmitted confidential trust documents to third parties.

Based on the foregoing, the plaintiff sued the local church, the United Methodist Church (UMC), and the trustee who embezzled the funds, on the following grounds:

civil embezzlement,
civil financial fraud and racketeering,
fraud,
misrepresentation,
concealment,
aiding and abetting a breach of fiduciary duties, and
unjust enrichment.

The plaintiff requested $12 million in damages and a permanent injunction barring the defendants from engaging in similar activities in the future.

The General Council on Finance and Administration (GCFA) of the UMC asked the federal district court in Michigan where the lawsuit was filed to dismiss the plaintiff’s claims against the UMC on two grounds.

The UMC “is a denomination, not a jural entity capable of being sued.”

The UMC is not a “true and accurate perpetrator of the alleged wrongdoing against the plaintiff.”

The court observed that

in its motion [to dismiss the case] the GCFA explained that “[the] United Methodist Church is simply a series of separate legal entities — including local churches, conferences, agencies, councils and boards — united by a common religious belief.” It therefore appears that the Michigan Conference of the United Methodist Church is the legal entity that [plaintiff] intended to sue. . . .

The undersigned [judge] respectfully recommends that the Court dismiss the United Methodist Church from this action because it is a religious denomination, not a legal entity. The undersigned further recommends that the Court grant [plaintiff’s] motion for leave to amend insofar as he wishes to name the Michigan Conference of the United Methodist Church as a defendant; it appears that this is the legal entity that [plaintiff] intended to sue in the first place. (emphasis added)

What this case means for churches and religious denominations

This case raises the extraordinary possibility that national religious denominations may not be liable for injuries occurring at affiliated churches if the following conditions are met:

The national church is a “religious denomination, not a jural entity capable of being sued.”
The denomination is not a “true and accurate perpetrator of the alleged wrongdoing” against the injured party.
The denomination is simply “a series of separate legal entities — including local churches, conferences, agencies, councils and boards — united by a common religious belief.”

The court concluded that the Michigan Conference of the UMC was a proper defendant since it supplied the deficiencies preventing the UMC from being a defendant in the underlying litigation.

Whether a court bars other national religious denominations from being sued for injuries over which it was not a “true and accurate perpetrator of the alleged wrongdoing,” remains to be seen.

An instructive example is the liability of national and regional denominational agencies for the numerous lawsuits pending against them for incidents of child sexual abuse occurring in affiliated churches.

Should a national or regional denomination be responsible for such wrongs? Such questions require careful examination of several considerations, including the authority, if any, conferred by a denomination’s governing documents over the activity or personnel causing the abuse, and the willingness of other courts to follow the ruling in the Michigan case summarized above.

Some courts have ruled that national and regional denominational agencies are not “jural entities” that can be sued for the wrongful acts of affiliated churches, clergy, and lay employees and volunteers. Consider the following example.

EXAMPLE. A California appeals court ruled that the UMC could be sued for the alleged misconduct of a subsidiary. The UMC was sued for the alleged improprieties of a subsidiary corporation that operated fourteen nursing homes in California, Arizona, and Hawaii. When the subsidiary encountered financial difficulties, it raised the monthly payments of residents in violation of the terms of their “continuing care agreements” that guaranteed lifetime nursing and medical care for a fixed price. The subsidiary went bankrupt, and a class of nearly 2,000 residents sued the UMC for fraud and breach of contract. Although the case eventually was settled out of court, a California appeals court did rule that the UMC could be sued for the misconduct of its subsidiary. The court emphasized that the UMC was a hierarchical denomination with control over local churches and subsidiary institutions, ranging from restrictions on the purchase or sale of property to the selection of local church pastors. Such control, observed the court, made the UMC responsible for the liabilities of its affiliated churches and subsidiary institutions. The court also found it relevant that the subsidiary organization that operated the nursing homes was engaged in a commercial enterprise.

However, the court suggested that the First Amendment guaranty of religious freedom might prohibit direct actions against the UMC on account of the actions of subsidiary organizations if the allowance of such actions “would affect the distribution of power or property within the denomination, would modify or interfere with modes of worship affected by Methodists or would have any effect other than to oblige UMC to defend itself when sued upon civil obligations it is alleged to have incurred.”

Barr v. United Methodist Church, 153 Cal. Rptr. 322 (1979), cert. denied, 444 U.S. 973 (1979).

Several courts have ruled that national and regional denominational agencies are “jural entities” that can be sued for the wrongful acts of affiliated churches, clergy, and lay employees and volunteers. This often is based on the conclusion that the affiliate is an “agent” of the denomination. Consider the following examples.

EXAMPLE. In 1951 the California Supreme Court ruled that a presbytery was responsible for injuries caused by the negligent driving of the pastor of an affiliated “mission church.” The court concluded that the pastor was an “agent” of the presbytery, since “he was not responsible to the local church but only to the presbytery. The presbytery, not the church, had the power to remove him. Furthermore, he could not transfer to another pastorate without permission of the presbytery, and in fact he was a member of the presbytery rather than of the local church.” The court concluded:

The existence of the right of control and supervision establishes the existence of an agency relationship [making the employer legally responsible for the acts of an employee committed within the scope of his or her employment]. The evidence clearly supports the conclusion of the jury that such control existed in the present case. The right of the presbytery to install and remove its ministers, to approve or disapprove their transfer to other jurisdictions, and to supervise and control the activities of the local churches, particularly those in the mission stage, is inconsistent with a contrary conclusion.

The court emphasized that the presbytery exercised significant control over “missions” churches (it held title to all church property, assisted with the churches’ finances, and paid a portion of clergy salaries). It cautioned that “we are not here called upon to determine the liability of the presbytery for negligence in the activities of a fully established and independently incorporated Presbyterian church which has passed from the mission stage.”

Malloy v. Fong, 232 P.2d 241 (Cal. 1951).

EXAMPLE. In a similar case, a California appeals court ruled that a trial court had improperly dismissed a lawsuit against a denomination (the International Church of the Foursquare Gospel). The denomination had been sued by a person who was injured by the negligent driving of one of the denomination’s pastors while engaged in church business. The court concluded that there was ample evidence demonstrating that the denomination was legally responsible for the injuries since the pastor was its “agent,” and was acting within the scope of church business at the time of the accident. Accordingly, the trial court acted improperly in dismissing the case.

The court based its finding of an agency relationship upon the following factors: (1) The denomination’s charter specified that it was incorporated “to supervise the management of the churches of the [denomination],” and to establish and grant charters to churches which would “be subject at all times to the supervision of [the denomination].” (2) The denomination ordained ministers “for the furtherance of the work of the [denomination].” (3) All property or equipment acquired by any local church is required to be held in the name of the denomination. (4) No church is allowed to execute a general contract to build without the written consent of a denominational official. (5) Each church is required to keep books of account and to prepare full and accurate monthly reports of activities in such form as is prescribed by the denomination. (6) The denomination is empowered to remove from office pastors who are not functioning in such a manner as to promote the best interests of their church. (7) Pastors who desire to transfer to a church in another state must secure a letter of transfer from a denominational official. (8) One of the pastor’s duties is to see that the local church cooperates in all programs of the denomination.

The court concluded, on the basis of these facts, that “manifestly, this evidence meets every requirement for the establishment of an agency relationship . . . Further, the pastor was not only an agent of the denomination, but also was acting within the scope of his duties at the time of the accident. Accordingly, the denomination was legally responsible for his negligence.”

Miller v. International Church of the Foursquare Gospel, Inc., 37 Cal. Rptr. 309 (Cal. 1964).

In summary, national and regional denominational agencies may be liable for injuries occurring on the property of affiliates or resulting from the wrongful or negligent acts of clergy, lay employees, and volunteers, but only if they have sufficient authority over the affiliate and its personnel

Here are several of the factors identified by the courts in deciding if a national or regional denominational agency is sufficiently integrated with an affiliate to be responsible for the affiliate’s liabilities. The more of these a particular denomination meets, the less likely it can avoid liability for the acts and liabilities of the affiliate. And conversely, the fewer of these that a denomination meets, the more likely it can avoid liability for the actions of affiliates.

A hierarchical denomination exercises control over local churches and subsidiary institutions, ranging from restrictions on the purchase or sale of property to the selection of local church pastors role with the local church
A denomination’s charter specifies that it was incorporated “to supervise the management of the churches of the [denomination],” and to establish and grant charters to churches which would “be subject at all times to the supervision of [the denomination].”
The denomination ordains ministers “for the furtherance of the work of the [denomination].”
All property or equipment acquired by any local church is required to be held in the name of the denomination.
No church is allowed to execute a general contract to build without the written consent of a denominational official.
Each church is required to keep books of account and to prepare full and accurate monthly reports of activities in such form as is prescribed by the denomination.
The denomination is empowered to remove from office pastors who are not functioning in such a manner as to promote the best interests of their church.
Pastors who desire to transfer to a church in another state must secure a letter of transfer from a denominational official.
One of the pastor’s duties is to see that the local church cooperates in all programs of the denomination.

Myerscough v. United Methodist Church, 2023 WL 3998256 (W.D. Mich. 2023).

Legal Developments

A Denominational Office Was Not Liable Because a Pastor Infected His Former Wife with HIV

A Mississippi case demonstrates how ministers are not necessarily agents of their churches or denominational offices.

Richard R. Hammar, Attorney, CPA

Bio

State: Mississippi
Categories: Denominations - Legal Liability

Key point 10-02. The doctrine of respondent superior imposes vicarious liability on employers for the negligent acts of their employees and agents committed within the scope of their employment.

Key point 3-08.09. Clergy can be liable for disclosing communications shared with them in confidence to others without the permission of the counselee.

The Mississippi Supreme Court ruled that a state conference of a denomination was not liable for injuries suffered by the former wife of an ordained minister who contracted HIV due to her husband’s repeated same-sex affairs.

Background

A minister was married in 1991. Over the ensuing decades, the minister served several churches within the denomination. During his marriage, the minister engaged in extramarital sexual affairs with other men.

At some point during late 2012 and the first half of 2013, the minister contracted human immunodeficiency virus (HIV) from one of his extramarital same-sex affairs. The minister continued to have intercourse with his wife. On July 26, 2013, he discovered he had HIV through a self-test. The next day, he informed his wife that he was HIV-positive. She later tested positive as well. The couple divorced later that year.

After the minister’s confession, the couple called a fellow minister and practicing psychotherapist from the denomination who drove six hours the next day to provide in-person crisis support.

To help the minister with his sex addiction, the therapist encouraged him “to remove any acting out material off of his computer, in the same way that an alcoholic would take his alcohol out of the house.” This included removing any pornography he had downloaded. The therapist also suggested he shut down and purge any email accounts he had used to secretly contact men to meet for sex.

According to the denomination’s book of discipline, self-avowed practicing homosexuals cannot serve in ordained ministry. And on July 28, 2013, the day after the minister revealed his extramarital homosexual behavior and HIV status to his wife, the state conference of the denomination placed the minister on leave.

The minister’s former wife sues for multiple claims

In 2016, the wife sued her former husband, the state conference, and the therapist for multiple claims, including intentional and negligent infliction of emotional distress, negligent hiring and retention, negligent supervision, interference with a civil action, breach of fiduciary duty, failure to warn, and concealment.

The wife alleged that her former husband had a duty to warn her of his HIV status before he had sex with her. And because her former husband was the state conference’s “agent,” she claimed the state conference was vicariously liable for his actions.

The complaint also alleged the state conference had an independent duty in selecting, hiring, appointing, and retaining its pastors. And had it exercised reasonable care, the state conference would not have hired or retained her husband and she would not have suffered her injury.

In particular, the complaint asserted that the state conference knew or should have known about the minister’s sexual behavior and that he posed a risk to others, including his wife. She insisted that had the state conference properly exercised church discipline over the minister and followed its own specific sexual-misconduct policies, the state conference would have warned the wife and remedied her husband’s dangerous conduct.

As for the therapist, the complaint focused on her actions in response to the minister’s phone call. It alleged that the therapist, by helping the minister remove data from his computer, had interfered with a civil lawsuit and had negligently or intentionally concealed information.

The complaint also alleged that the therapist owed the wife a fiduciary duty, which the therapist breached by not warning her of her husband’s “high-risk sexual behavior with men.”

Why the court rejected the wife’s claims

The court rejected all of the wife’s claims against the state conference and the therapist for the following reasons.

The claims against the state conference

The court noted that the wife’s theory of recovery against the state conference “centers on her assertion that [the state conference] owed her a duty to discover and somehow remedy her husband’s extramarital sexual activities and that its failure to do so caused her injury.”

The court concluded, however, that the state conference did not owe the wife any such duty because “[u]nder Mississippi law . . . ‘an employer’s duty to supervise does not include a duty to uncover his employees concealed, clandestine, personal activities.’”

The wife insisted that the state conference assumed a duty by adopting the denomination’s sexual-misconduct policy, which forbids practicing homosexuals from serving as ministers. This policy, as the wife described it in her own words, included:

establish[ing] a regimen of psychological testing, education, interviews, character examinations, and careful supervision and monitoring to ensure that its clergy did not violate [the state conference’s] policies against sexual misconduct. A clergy member who was a practicing homosexual or used pornography would be brought up on charges (which would alert his spouse to the conduct), and could potentially be terminated.

The court noted:

[The wife’s] reliance on the [denomination’s] Book of Church Discipline—namely, its prohibition against ordaining practicing homosexuals—as giving rise to a duty to warn her of her husband’s homosexual behavior is fraught with First Amendment [i.e., religious freedom] concerns. . . .

Simply put, by seeking to hold [the state conference] liable for not protecting her against the negative consequences of her husband’s homosexual behavior, [the wife] is asking this court to hold [the state conference] “to a higher standard or impose special duties or burdens on the basis of [its] religious status” and church doctrine surrounding sexual behavior. . . . Because the First Amendment prevents [her] from filing suit based on the failure to perform religious or ecclesiastical duties, her claims against [the state conference] fail as a matter of law.

Next, the court dealt with the wife’s contention that because the minister was the state conference’s “agent,” it was vicariously liable for his actions. The court observed:

Similarly, [the wife’s] claims against [the state conference] based on vicarious liability also fail. . . . Here, [the minister’s] specific action for which [she] seeks to hold [the state conference] vicariously liable was his having sexual intercourse with his wife after engaging in high-risk sexual behavior with other men. [She] certainly presents no evidence that this act was performed in the course and scope of [her ex-husband’s] church duties, over which [the state conference] had power and control.

The court then quoted from one of its earlier decisions:

[I]t defies reason to argue that engaging in an affair at work or during working hours in any way furthered the business interests of [the employer]. Children’s Med. Group, P.A. v. Phillips, 940 So. 2d 931.936 (Miss. 2006).

It concluded:

“There is no vicarious liability where an agent acted with personal or malicious motive, unless the principal authorized or ratified the acts.” . . . And [the minister’s] personal decision to initiate sex with his wife after knowingly engaging in high-risk extramarital sexual behavior cannot be said to have been authorized or ratified by [the state conference].

The claims against the therapist

The wife sued the therapist, claiming that the therapist owed her a fiduciary duty which was breached by not warning her of her husband’s “high-risk sexual behavior with men.”

The court noted that a fiduciary duty is established “[w]henever there is a relation between two people in which one person is in a position to exercise a dominant influence upon the former, arising either from weakness of mind or body, or through trust. . . .”

The wife claimed that she and the therapist were in a fiduciary relationship, but the court concluded that she failed to demonstrate such a relationship:

[T]he only evidence [she] presents is that [the therapist] “rushed in” to provide guidance to [the minister and his wife] after [he] revealed he had infected [her] with HIV. Not only is the proposed relationship ancillary, a fiduciary relationship cannot arise after the alleged breach of that duty has already occurred. . . . Prior to that time, [the wife’s] evidence merely establishes [the therapist] . . . was a good friend of the couple.

What this means for churches

This case is important for two reasons.

1. Ministers are not necessarily agents

The most significant aspect of the court’s opinion was its conclusion that ministers are not necessarily agents of their church or denomination.

The significance of this ruling is the fact that a finding of agency would make the principal (i.e., a church or denominational agency) liable for the agent’s wrongdoing apart from any finding of negligence or culpability by the principal. The principal is responsible for the agent’s acts (i.e., sexual misconduct, negligent driving) no matter how careful it was.

To illustrate, consider a denomination with 25,000 ministers. If the ministers are agents of the denomination, then their wrongful conduct is imputed to the denomination, and no amount of care on its part changes that. Since it would be impossible for the denomination to police 25,000 ministers, it is absolutely liable with no defense. This makes a finding that ministers are agents of a denomination an existential threat jeopardizing its very existence.

Fortunately, some courts, like this one, have refused to characterize ministers as agents of their church or denomination, at least for injuries they cause when not acting in furtherance of the agency relationship.

This court concluded that ministers are agents of a church or denomination only if they cause injury while acting in furtherance of their agency status. The court explained:

Here, [the minister’s] specific action for which [his wife] seeks to hold [the state conference] vicariously liable was his having sexual intercourse with his wife after engaging in high-risk sexual behavior with other men. [She] certainly presents no evidence that this act was performed in the course and scope of [her ex-husband’s] church duties, over which [the state conference] had power and control. . . . “There is no vicarious liability where an agent acted with personal or malicious motive, unless the principal authorized or ratified the acts. . . . And [the minister’s] personal decision to initiate sex with his wife after knowingly engaging in high-risk extramarital sexual behavior cannot be said to have been authorized or ratified by [the state conference].

2. Disclosing risks of harm

The ex-minister’s wife claimed that the therapist was responsible for her HIV infection because she failed to warn her of her husband’s “high-risk sexual behavior with men.” This raises the question of whether a therapist (or pastor) has a duty to inform others that a counselee poses a threat of harm or death, and whether such a warning violates a duty of confidentiality.

Clergy who disclose confidential information shared with them in counseling may be exposing themselves, as well as their church, to liability on the basis of malpractice, invasion of privacy, breach of fiduciary duty, and infliction of emotional distress.

This conclusion may apply even when clergy share confidential information in order to discipline a member for violating church standards or to protect third parties from harm. As a result, clergy should not disseminate information obtained from confidential counseling sessions without first seeking legal advice.

Woodard v. Miller, 326 So.3d 439 (Miss. 2021)

Legal Developments

National, Regional Denominational Agencies Not Legally Responsible for Child’s Brain Damage Incurred at Affiliated Church

Regional and national denominational agencies are not necessarily liable for deaths and injuries occurring on the property of affiliated churches.

Richard R. Hammar, Attorney, CPA

Bio

State: Louisiana
Categories: Denominations - Legal Liability, Personal Injuries on Church Property or During Church Activities

Key point 10-18.2. Most courts have refused to hold denominational agencies liable for the acts of affiliated ministers and churches, either because of First Amendment considerations or because the relationship between the denominational agency and affiliated church or minister is too remote to support liability.

Key point 10-18.3. There are several legal defenses available to a denominational agency that is sued as a result of the acts or obligations of affiliated clergy and churches. These include a lack of temporal control over clergy and churches; a lack of official notice of a minister's prior wrongdoing in accordance with the denomination's governing documents; lack of an agency relationship; the prohibition by the First Amendment of any attempt by the civil courts to impose liability on religious organizations in a way that would threaten or alter their polity; and elimination or modification of the principle of joint and several liability.

A Louisiana appeals court ruled that national and regional denominational agencies were not legally responsible for permanent brain damage suffered by a toddler who fell into a filled, uncovered baptistery in an affiliated church.

On December 19, 2013, a mother and her 22-month-old daughter attended a dinner at a church in their community. At some point during the dinner, the daughter was found submerged in the baptismal pool of the church. The child suffered a severe brain injury that has left her unable to walk, talk, or feed herself. The mother sued the church, and regional and national denominational agencies with which it was affiliated (the "regional church" and "national church") claiming that they had all been negligent in failing to guard the baptismal pool in any way and leaving the pool full of water. The pool is four feet deep. There are no doors or other barriers separating the pool from the general premises of the church and no cover over the pool or any other safety features.

The regional church and national church filed motions for summary judgment seeking dismissal of the mother's claims on the ground that neither had any responsibility for the employment of the church's pastor, nor was there any employer-employee or agency relationship between them and the local church sufficient to impose upon them any liability for the actions of the church. They each claimed that there were no genuine issues regarding their lack of supervision, governance, or control over the church, and, therefore, they were entitled to judgment as a matter of law.

In support of their motions for summary judgment, the regional church and national church pointed to the national church's constitution and bylaws, which clearly demonstrate that these two entities are separate and distinct from the local church. For example, the constitution states that each affiliated church

has the right of self-government … and shall have the power to choose or call its pastor, elect its official board, and transact all other business pertaining to its life as a local unit. It shall have the right to administer discipline to its members according to the Scriptures and its constitution or bylaws. It shall have the right to acquire and hold title to property, either through trustees or in its corporate name as a self-governing unit. The fact it is affiliated with [the national church] shall in no way destroy its rights as above stated or interfere with its sovereignty.

The national church's bylaws clarify that the limited "control" exercised by the national or regional churches over affiliated churches is limited to the approval or disapproval of "scriptural doctrine and conduct" and the revocation of a church's certificate of affiliation if deemed necessary. The national church's bylaws add:

Affiliated churches are deemed to be sovereign, autonomous, self-governing, and self-determining bodies, which have, by their sovereign, self-determining action in making application for and receiving recognition as [an] affiliated church, entered into an agreement … to be amenable to the [national and regional churches] in matters of doctrine and conduct.

An officer of the national church testified that affiliated churches are congregational in polity and that the denomination is a cooperative fellowship of independent and autonomous churches that have plenary control over their own properties. This officer testified that the national church has no authority to require churches to comply with any risk management recommendations, and that it lacks authority to supervise or control church property. An officer of the regional church testified that the denomination practices baptism by immersion, but stressed that neither the national church nor regional church controlled the setting for baptisms by immersion, which could be done anywhere the local pastor chooses. Further, this officer testified that the national and regional churches had no ownership of the property of local churches.

The trial court, in dismissing the mother's claims against the national and regional churches, relied on the following facts:

Neither had a master-servant or employment relationship with the local church or anyone employed by it.
There was no relationship between the national and regional churches, and the local church where the injury occurred, other than on matters of religious doctrine.
The national and regional churches never had any ownership, custody, or control of the local church.
All of the defendants were separately incorporated with their own officers and directors and with no common officers or directors.
All of the defendants were insured separately.
Each defendant oversees its own finances and hires its own employees free of any control from the other.
The baptistery involved in this accident, along with the building and land containing it, was owned solely by the local church.
The national church's constitution and bylaws show that the local churches have plenary control of their property.
The national and regional churches have never been involved in any jointly financed business venture with the local church.
The national and regional churches recognize the sovereign and self-governing status of affiliated churches including the right to acquire, use, and maintain property exclusively.

The trial court concluded that the mother had presented no evidence to controvert the evidence submitted by the national and regional churches, or which would indicate that they controlled the daily secular or financial affairs of the local church. Absent such evidence, the court concluded that there was no authority for finding them liable for injuries occurring in affiliated churches. It also found that the affidavits—the constitution and the bylaws—were "replete with references to the sovereign and autonomous nature of affiliated churches."

In dismissing the mother's claim that the national and regional churches, and all affiliated churches, comprised one "single-business enterprise" making any one defendant legally responsible for the acts and omissions of the others, the court noted that the single-business-enterprise doctrine was a theory for imposing liability where two or more business entities act as one. When corporations integrate their resources in operations to achieve a common business purpose, each business may be held liable for wrongful acts done in pursuit of that purpose. But the trial court found that the main focus of the relationship between the national and regional churches and local churches was doctrinal in nature. It found nothing to indicate that the two councils were responsible for maintaining the individual church's property.

The mother appealed the trial court's dismissal of her claims against the national and regional church. She alleged three bases of liability that the trial court had rejected:

Respondeat superior liability
Under Louisiana law, "masters" and employers are answerable for the damage occasioned by their servants in the course of their employment. This form of liability is known as respondeat superior (the superior, or employer, responds). A servant is a person employed to perform services in the affairs of another and who, with respect to the physical conduct in the performance of the services, is subject to the other's control or right to control. The word servant includes anyone who performs continuous service for another and whose physical movements are subject to the control or right to control of the other as to the manner of performing the service. The single, most important factor to consider in deciding whether the master-servant relationship exists is the right of the employer to control the work of the servant or employee. The right of control necessarily encompasses "supervision, selection and engagement, payment of wages or salary and the power to dismiss."

The appeals court concluded that the national and regional churches
had no right under the constitution and bylaws to control the property of [the church] or to dictate what actions were taken on a day-to-day basis at the church. The individual churches own the property on which the churches are located, insure them individually and have control over who they employ as their pastors. Although the pastors [are licensed and ordained by the denomination] which has the right to intervene when a pastor has acted in an inappropriate manner or contrary to the teachings of the church, all the evidence presented leads to the conclusion that the local churches are sovereign and autonomous. The national and regional churches have no control over the daily secular or financial aspects of the local church; and, therefore, there is no master-servant relationship between them and the church.

Single-business enterprise
The appeals court concluded that the trial court correctly rejected "single-business enterprise" as a basis of liability:
The single-business-enterprise doctrine is a theory for imposing liability where two or more business entities act as one. Generally, under this doctrine, when corporations integrate their resources in operations to achieve a common business purpose, each business may be held liable for wrongful acts done in pursuit of that purpose ….

When determining whether a corporation is an alter ego, agent, tool or instrumentality of another corporation, the court is required to look to the substance of the corporate structure rather than its form. The courts have considered various factors to support an argument that a group of entities constitute a single-business enterprise. These factors can include such things as … common directors or officers; unified administrative control of corporations whose business functions are similar or supplementary; directors and officers of one corporation acting independently in the interest of that corporation; corporation financing another corporation; corporation paying the salaries and other expenses or losses of another corporation; receiving no business other than that given to it by its affiliated corporations; corporation using the property of another corporation as its own; noncompliance with corporate formalities; and common employees and services rendered by the employees of one corporation on behalf of another corporation. This list is illustrative and is not intended as an exhaustive list of relevant factors. No one factor is dispositive of the issue of single-business enterprise.

The court concluded that the national and regional churches
presented evidence in the form of the constitution and bylaws, as well as deposition testimony, which showed that [the church where the accident occurred] is a sovereign and autonomous entity over which they had no control. The national and regional churches are separately incorporated, as is each church, which becomes a part of the [denomination]. Judged by the substance of corporate structure rather than the form, the national and regional churches do not share officers and directors with local churches, do not pay the salaries of the local pastors, do not act independently on behalf of the local churches and do not insure the properties owned by the local churches. The mother presented no evidence to controvert that of the national and regional churches showing that there is no single-business enterprise between them. Therefore, there are no genuine issues of material fact remaining in this regard, and this assignment of error is without merit.

Unincorporated association
The mother further claimed that the national and regional churches, and local church, comprised an "unincorporated association" making each defendant fully liable for the acts of other defendants. In rejecting this novel theory, the court observed:
An unincorporated association … does not come into existence or commence merely by virtue of the fortuitous creation of a community of interest or the fact that a number of individuals have simply acted together; there must also be an agreement whereby two or more persons combine certain attributes to create a separate entity for a legitimate purpose. While the parties need not specifically intend or have knowledge of all the legal ramifications of juridical personality, they must at least conceive of their creation as a being or thing separate from themselves … .

Clearly, under the constitution and the bylaws, all three levels of the church are separate corporate entities, and the sovereign nature of the local churches is often reiterated. Through the constitution and the bylaws, the national church has devised a method by which … individual churches are created to act autonomously and free of the national and regional churches in all but doctrinal theory. Therefore, there is no agreement whereby two or more persons combine certain attributes to create a separate entity for a legitimate purpose in regard to the [denomination] and there is no unincorporated association.

What this means for churches

This tragic case is illustrative for the following reasons:

1. It demonstrates the risks involved in maintaining filled, uncovered baptisteries on church premises.

2. It demonstrates that regional and national denominational agencies are not necessarily liable for deaths and injuries occurring on the property of affiliated churches. In this case, regional and national denominational agencies were not liable for the injuries sustained by the toddler who fell into the church baptistery because:

Most importantly, the denomination's constitution and bylaws unequivocally described the independence and autonomy of affiliated churches, and the lack of any authority by regional and national denominational agencies to supervise or control affiliated churches or church properties. The language of a denominational agency's governing documents will often determine whether the agency is, or is not, vicariously liable for the acts and omissions of affiliated churches. Often, such documents are written without a legal review, and with no thought of legal liability, and this becomes apparent when the plaintiffs' attorneys seek to establish vicarious liability of a parent denominational agency based on ambiguous or technically imprecise language. This makes a periodic legal review of denominational governing documents a necessity.
The limited authority of the national and regional church over affiliated churches was limited to doctrinal fidelity, precluding liability based on respondeat superior, single-business enterprise, and an unincorporated association status. 185 So.3d 125 (La. App. 2016).

Legal Developments

Clarifying When Churches Are and Aren’t Liable for the Actions of Volunteers

Church Law and Tax Report Clarifying When Churches Are and Aren’t Liable for the Actions

State: Oregon
Categories: Denominations - Legal Liability

Church Law and Tax Report

Clarifying When Churches Are and Aren’t Liable for the Actions of Volunteers

Key point 10-02. The doctrine of respondeat superior imposes vicarious liability on employers for the negligent acts of their employees committed within the scope of their employment.

Key point 10-18.2. Most courts have refused to hold denominational agencies liable for the acts of affiliated ministers and churches, either because of First Amendment considerations or because the relationship between the denominational agency and affiliated church or minister is too remote to support liability.

Key point 10-17.1. Punitive damages are monetary damages awarded by a jury “in addition to compensation for a loss sustained, in order to punish, and make an example of, the wrongdoer.” They are awarded when a person’s conduct is reprehensible and outrageous. Most church insurance policies exclude punitive damages. This means that a jury award of punitive damages represents an uninsured risk.

A federal district court in Oregon ruled that national and regional denominational agencies were not liable for the sexual molestation of a minor by a volunteer youth worker in an affiliated church. In 1993, a church assigned a 14-year-old girl (the “victim”) to a “small group” overseen by a lay volunteer (“Carl”). The victim claims that at this time Carl began a process of “grooming” her that culminated in sexual abuse. The grooming behavior included paying special attention to her and telling her that he had a special bond with her, inviting her to his home and spending long periods of time alone with her, soliciting her opinion as to questions of theology and pedagogy, undertaking to provide her with Christian counseling, and cultivating the gratitude and loyalty of her parents.

Beginning the following year, when the victim was 15 years old, he began kissing and fondling her, and within a year was having sexual intercourse with her. The two engaged in sex acts as frequently as three times per week, in cars, in the victim’s home, in Carl’s home, and at church events. These acts continued for a period of years, until the victim was 20 years old.

There is evidence that other church small group leaders developed suspicions that the victim and Carl were involved in a sexual relationship during this period, and that one such small group leader reported his suspicions to two church leaders, but no investigation followed and no action was taken.

The church the victim attended is affiliated with the Evangelical Lutheran Church of America (ELCA). The ELCA’s governing documents state it is organized into three expressions: the ELCA national organization, the synods or assemblies of congregations, and the individual congregations or churches that make up the synods. Eventually the victim terminated her relationship with Carl, and sued her church, a local synod, and the ELCA on several grounds, including negligent supervision and negligent retention. She sought damages in the amount of $6 million for pain and suffering, and $10 million for punitive damages.

Church Polity

The court made the following findings regarding church polity in the ELCA:

• The ELCA constitution sets forth certain terms and conditions with which the synods and congregations must comply in order to remain within the national denomination.

• The ELCA constitution specifies that affiliated churches are subject to the “oversight, direction, control, and discipline” of the ELCA and regional synod.

• The ELCA constitution specifies that each church of the denomination is required to be run by an ordained pastor, and that every such pastor must be selected and hired from a “roster” of “approved” pastors maintained by ELCA.

• The ELCA maintains similar “rosters” of approved persons for some lay leadership positions within congregations.

• Churches may select “non-rostered” lay leaders for positions within certain categories, including the youth leadership positions filled by Carl (a “non-rostered” lay leader).

• Each congregation is required to adopt the ELCA’s model constitution, and adhere to a specific set of theological doctrines.

• If a congregation were to hire a lay leader who promulgated a different theological doctrine to persons in his or her charge, ELCA and synod would treat such hiring as a violation of the ELCA constitution.

• Congregations are under the direct control of the synods in connection with all doctrinal and theological matters, and synods have the power to discipline congregations for deviations from the approved ECLA theology.

• Under the ELCA constitution, “youth ministry” is a part of the “evangelical mission” of all three “expressions” of the denomination; responsibility for fostering youth organizations is entrusted by ELCA to the synods; and the Oregon Synod relies upon the congregations within its territory to fulfill the denomination’s youth-ministry mission.

• In the 1980s and 1990s, the local church operated a youth ministry it referred to as the “Great Commission Subcommittee” or “GCS.” The express purpose of GCS was to “share” ECLA theology with young persons, and there is evidence that church leaders viewed the program as a vehicle both for theological education and for recruitment of youth into the denomination. Children involved in the GCS program were divided into “small groups” of approximately ten children each, and each such group was assigned to a “small group leader.” Small group leader responsibilities included conducting bible-study meetings; modeling “Christian leadership;” mentoring children within the group and “presenting the Gospel” to them; conducting group activities; and providing personal attention to the needs of the children within the group.

• In 1993, Carl was elected to chairman of his church’s youth committee, at which time he also began serving as a GCS small group leader.

Respondeat Superior

The victim claimed that the church defendants were liable for Carl’s acts on the basis of respondeat superior. The court noted that under the respondeat superior doctrine, “an employer is liable for an employee’s acts when the employee acts within the scope of employment.” It further observed: “Three requirements must be met to conclude that an employee was acting within the scope of employment. These requirements traditionally have been stated as: (1) whether the act occurred substantially within the time and space limits authorized by the employment; (2) whether the employee was motivated, at least partially, by a purpose to serve the employer; and (3) whether the act is of a kind which the employee was hired to perform.”

The court concluded that neither the ELCA nor Oregon Synod could be liable for Carl’s acts on the basis of respondeat superior:

I find that neither entity had the requisite right to control at any material time … . It is clear that ELCA and the synod retained and from time to time actually exercised the right to control the content of the theological and ecclesiastical teachings of the servants or employees of the church. By contrast, there is no evidence that either ELCA or the synod ever asserted or attempted to exercise any right to control the manner or place in which those teachings were carried out, or in any other sense to control Carl’s actions in connection with his provision of volunteer services to the church. Moreover, although it is reasonable to infer … that ELCA and/or the synod had, in consequence of those entities’ authority to enforce the “covenant” of the ELCA constitution (including through expulsion of congregations that may deviate from approved doctrines and practices), the ability as a practical matter to exert further and broader-reaching influence over congregational supervision and oversight of lay volunteers, such de facto influence (or potential influence) over the church’s relationship with Carl is insufficient to satisfy the right-to-control element of the respondeat superior analysis, which requires the right to control his actions in the course of his provision of services. I therefore agree with the parties that ELCA and the Synod cannot be liable in connection with Carl’s conduct on a respondeat superior theory.

General and Apparent Agency

The court rejected the victim’s claim that the church defendants were liable for Carl’s acts on the basis of agency. The court noted that an agency relationship results from “the manifestation of consent by one person to another that the other shall act on behalf and subject to his control, and consent by the other so to act.” An agency relationship can arise “either from actual consent (express or implied) or from the appearance of such consent.” In either case, “the principal is bound by or otherwise responsible for the actual or apparent agent’s acts only if the acts are within the scope of what the agent is actually or apparently authorized to do.”

“Apparent authority” to do any particular act “can be created only by some conduct of the principal which, when reasonably interpreted, causes a third party to believe that the principal consents to have the apparent agent act for him on that matter. There accordingly are two keys to the analysis: (1) the principal’s representations; and (2) a third party’s reasonable reliance on those representations.” The court further explained apparent agency as follows:

As to the first requirement—the representation by a putative principal—an agent’s actions, standing alone and without some action by the principal, will not give rise to apparent authority. Rather, the principal must take some affirmative step in creating the appearance of authority, one that the principal either intended to cause or “should realize” likely would cause a third party to believe that the putative agent has authority to act on the principal’s behalf. The principal’s words, conduct, or other representation need not be witnessed directly by or made directly to the third party, but the representation of authority must be traceable to the principal for the principal to be liable on a theory of apparent authority.

As to the second key element—reliance—the third party, in deciding to deal with the apparent agent, must in fact rely on the principal’s representation, and that reliance must be objectively reasonable. In assessing the reasonableness of the reliance, the analysis is influenced by what is customary and usual for certain positions or within certain professions.

The court stressed that a principal “is vicariously liable for an act of its nonemployee agent only if the principal ‘intended’ or ‘authorized the result or the manner of performance’ of that act.” It concluded:

Although a principal can be vicariously liable for the negligence of an agent who is not an employee, such liability arises only if the principal actually or apparently had a right of control over the agent’s injury-causing actions “similar to the control that an employer exercises over an employee.” The fact that a nonemployee is actually or apparently authorized in some general way to act on a principal’s behalf is not a sufficient basis to impose vicarious liability on the principal for the actual or apparent agent’s tortious conduct. Rather, to impose vicarious liability for a nonemployee agent’s physical conduct, the principal must have—or appear to have—a right to control how the act is performed—that is, “the physical details of the manner of performance”—that is characteristic of an employee-employer relationship. (emphasis in original)

The court concluded that it was possible that Carl “was in an agency relationship with both ELCA and the synod.” It observed:

From the evidence discussed above—including in particular evidence that, under the ELCA national organization’s constitution, “youth ministry” is a part of the “evangelical mission” of all three “expressions” of the ELCA denomination, that responsibility for fostering youth organizations is entrusted by ELCA to the regional synods, and that the Oregon Synod relies upon the congregations within its territory to fulfill the denomination’s youth-ministry mission—a finder of fact could reasonably conclude that the church was the synod’s agent for purposes of fulfilling the ELCA youth-ministry mandate, and that the synod was ELCA’s agent for those same purposes. Similarly, the evidence of record tends to establish that the church retained Carl on a volunteer basis to act as its agent for purposes of performing GCS small group leader and youth ministry services. The Oregon courts have consistently held that an agent of a second agent is an agent of the second agent’s principal, so long as the first agent is charged with assisting the second agent in performing its duties to the ultimate principal. Carl’s undisputed agency relationship with the church is thus imputable to both the synod and to ELCA.

However, the court stressed that “the fatal flaw” in the victim’s agency theory

lies not in her failure to establish that Carl can properly be characterized as the agent of each of those entities for material purposes, but rather in her failure to adduce evidence from which a jury could reasonably conclude that either ELCA or the synod had any right to control the physical details of the performance of Carl’s volunteer duties. ELCA and the synod retained the express rights to control the content of his theological and ecclesiastical teachings and to impose discipline for any deviation from ELCA-approved doctrine, but the record contains no evidence tending to suggest that either had the right to control the manner of his service. Because such control over the physical details of an agent’s service is a sine qua non of vicarious principal liability, I agree with ELCA and the synod that neither of those entities can be held liable for Carl’s complained-of intentional torts on a theory of general agency liability.

Punitive Damages

The victim’s lawsuit asked for $10 million in punitive damages. The court determined that punitive damages were not available. Punitive damages are damages that can be assessed against a defendant for reckless or intentional acts. They are designed to both punish and deter. They generally are not covered by liability insurance policies as a matter of public policy.

Can punitive damages be assessed against a principal for the intentional or reckless acts of an agent? Yes, the court concluded, but only if the agent’s conduct giving rise to exposure to punitive damages occurred within the scope of the agent’s agency. It concluded:

While [the victim] takes the position here that the abuse she suffered was caused by or resulted from conduct undertaken within the scope of Carl’s duties to the congregation, it is emphatically not the case that any evidence of record suggests that the congregation, ELCA, or the synod intended or authorized the tortious abuse itself, or indeed that any of those entities should have understood that sexual abuse was likely to result from Carl’s provision of youth-ministry services. In the absence of any such evidence, imposition of vicarious punitive damages on the congregation, ELCA, or the synod would not have the effect of deterring further such misconduct by any agent thereof or of punishing a principal for authorizing an agent’s torts. For that reason, and because no Oregon court has ever suggested that a master could be vicariously liable for punitive damages on the basis of intentional conduct by the master’s servant of a kind the servant was not hired or instructed to perform, I recommend that the victim’s prayer for punitive damages be stricken to the extent it seeks award of punitive damages against ELCA, the Synod, and/or the congregation.

What This Means For Churches:

Most incidents of child abuse in churches are committed by volunteers. This is not surprising. Consider the numbers. There are far more volunteers than paid employees who work with minors in churches, and so it is more likely that volunteers will abuse children than employees.

Many persons who were molested as minors by a church volunteer sue the local church, and denominational agencies with which the church is affiliated, on the basis of agency. But as this case demonstrates, this is often a difficult, if not impossible, task. As a result, this case will be of assistance to churches and denominational agencies in the defense of sexual abuse claims involving volunteers. The key points are summarized below.

1. respondeat superior
The court dismissed the victim’s claim that the church defendants were liable for Carl’s acts on the basis of respondeat superior. As the court noted, liability on this basis requires that an employee’s wrongful acts were committed in the “scope of employment.” The court rejected the victim’s argument that the authority exerted by the ELCA and synod over the theological teachings of the local church the victim attended was sufficient “control” to make the ELCA and synod liable for Carl’s acts. It noted that there was no evidence that either the ELCA or synod ever “asserted or attempted to exercise any right to control the manner or place in which those teachings were carried out, or in any other sense to control Carl’s actions in connection with his provision of volunteer services to the church.”

2. agency
The doctrine of agency is often cited as a basis of liability for churches and denominational agencies in cases of child abuse. Victims may claim that the offender is an agent of the church and a denominational agency, or that the church is an agent of a parent denomination.

The court concluded that Carl was an agent of the church, synod, and ELCA based on provisions in the ELCA constitution. But, this did not make the church defendants liable for his wrongful acts because he acted as their agent “only for purposes of performing GCS small group leader and youth ministry services.” The court concluded:

ELCA and the synod retained the express rights to control the content of his theological and ecclesiastical teachings and to impose discipline for any deviation from ELCA-approved doctrine, but the record contains no evidence tending to suggest that either had the right to control the manner of his service. Because such control over the physical details of an agent’s service is a sine qua non of vicarious principal liability, I agree with ELCA and the synod that neither of those entities can be held liable for Carl’s complained-of intentional torts on a theory of general agency liability.

This part of the court’s decision is important, for two reasons. First, it correctly distinguishes between ecclesiastical and temporal control. While a denominational agency may exert some level of control over ecclesiastical functions of affiliated churches or clergy, this limited authority is not sufficient to make the agency liable for the temporal or non-ecclesiastical acts. Second, this aspect of the court’s decision suggests that denominational leaders review their governing documents to ensure that they contain no language that could inadvertently convert local church employees and volunteers into general agents of the denomination.

The most significant part of the court’s decision was that while it recognized that Carl may have been an agent (express or apparent) of his church, synod, and the ELCA, this did not establish that those entities were liable for his wrongful acts since the agency relationship failed to confer upon him the right to control the manner in which he performed his duties. The “fatal flaw” in the victim’s agency theory was

her failure to adduce evidence from which a jury could reasonably conclude that either ELCA or the synod had any right to control the physical details of the performance of Carl’s volunteer duties. ELCA and the synod retained the express rights to control the content of his theological and ecclesiastical teachings and to impose discipline for any deviation from ELCA-approved doctrine, but the record contains no evidence tending to suggest that either had the right to control the manner of his service. Because such control over the physical details of an agent’s service is a sine qua non of vicarious principal liability, I agree with ELCA and the synod that neither of those entities can be held liable for Carl’s complained-of intentional torts on a theory of general agency liability.”

3. punitive damages
The court dismissed the victim’s $10 million punitive damages claim on the ground that punitive damages can be assessed against a principal for the intentional or reckless acts of an agent “only if the agent’s conduct giving rise to exposure to punitive damages occurred within the scope of the agent’s agency.” That is, the church defendants could not be liable for punitive damages based on the intentional conduct of its agent that he “was not hired or instructed to perform.” This reasoning makes it more difficult for churches to be assessed punitive damages in sexual misconduct cases since the perpetrator obviously was not hired or directed to perform such wrongful acts. This is significant because punitive damages generally are not a covered loss under general liability insurance policies. Prasnikar v. Our Savior’s Lutheran Church, 2014 WL 7499377 (D. Or. 2014).

Legal Developments

Former Scout Leader Sued for Molestation

Court rules scouting organization is not responsible.

State: Illinois
Categories: Denominations - Legal Liability, Sexual Misconduct by Clergy, Lay Employees, and Volunteers

Church Law and Tax Report

Former Scout Leader Sued for Molestation

Court rules scouting organization is not responsible.

Key point 10-04.2. Some courts have found churches not liable on the basis of negligent selection for the molestation of a minor by a church worker since the church exercised reasonable care in the selection of the worker.

Key point 10-04.3. Churches can reduce the risk of liability based on negligent selection for the sexual molestation of minors by adopting risk management policies and procedures.

Key point 10-07. A church may exercise reasonable care in selecting ministers or other church workers but still be responsible for their misconduct if it “retained” them after receiving information indicating that they posed a risk of harm to others.

An Illinois court ruled that a scouting organization was not responsible for the molestation of a young boy by a former scout leader. A minor boy (the “victim”) was sexually molested by a scout leader. The victim’s mother sued the scout leader (the “defendant”) for assault and battery, and the national and regional scouting organizations (the “scouting defendants”) for negligent hiring and negligent retention of the perpetrator. The mother’s lawsuit alleged that the victim met the defendant while participating in a local scout troop; that the victim often spent time alone with the defendant at the latter’s home and other locations; and, that the defendant engaged in multiple sexually deviant acts with the victim over the course of 10 months.

The first incident occurred in February 2006, when the victim accompanied the defendant on an overnight trip and they shared the same bedroom at a hotel. The victim’s mother consented to this trip because the defendant had been in scouting for several years and she had no suspicions about him and trusted him.

The mother claimed that the national and regional scouting organizations were “negligent in the manner that [they] screened, hired, retained, and supervised the defendant when [they] knew or should have known that he posed a threat of sexual abuse to children.” She further claimed that the scouting defendants “failed to conduct background checks on new or existing scouting leaders, employees, agents, volunteers, agents or apparent agents or more carefully screen scout leaders who did not then and never had sons in scouting.”

The mother’s lawsuit cited the following evidence in support of her claims of negligent hiring and retention:

• A scouting volunteer who attended the same church as the defendant testified to his suspicions about the defendant. He noted that the defendant was involved in the youth program and manifested “an inordinate amount of interest” in young boys at church. The volunteer observed that the defendant would “hug the kids, and pick them up, if they were small enough, and rub up against them.” He also testified that the defendant acted suspiciously at the YMCA where the volunteer’s two minor sons were part of a swim team. The defendant would position himself in the locker room so that he could “watch,” in one of the mirrors, the boys change clothes. The volunteer assumed that it was because of the flexibility of the defendant’s job that he was able to be at the YMCA on afternoons when the boys’ swim team was practicing.

• The same volunteer further claimed that the defendant displayed all of the “warning signs” of which scout volunteers are admonished as part of their training. In particular, volunteers are given “the name of the scout executive and his direct phone number so that if you ever saw anything that was inappropriate that was going on, you were supposed to call directly to him.” The volunteer conceded that he did not share his concerns with scouting officials because he did not have a “smoking gun” that the defendant was molesting boys.

• The defendant had served in the Navy until his honorable discharge in 1978. His record contains an “Office Separation Questionnaire” completed by the defendant in which he indicated that he was asked to resign on suspicion of “homosexual tendencies” and possession and sale of drugs.

• The defendant had a prior conviction for driving while intoxicated.

The scouting defendants cited the following evidence in opposition to the mother’s claims:

• One of the defendant’s direct supervisors testified that he had received no complaints about the defendant’s job performance or his suitability for working with minors.

• Another scouting executive testified that he “never detected anything to suggest that the defendant was unfit for a scouting position.”

• A third scouting official testified that after the defendant’s molestation of the victim was revealed, he had “wracked his brain” for warning signs that he might have observed in the defendant, but could recall no reason to suspect that the defendant was a danger to children. However, this executive did recall that the defendant frequently took photographs at scout events. Photography was not part of his duties as district executive, and scouting officials were unsure why he was taking the photos of young boys.

• The defendant had never been employed by the national scouting organization (Boy Scouts of America) and had ceased to be employed by the regional organization in February of 2006, several months before the first incident of sexual molestation occurred during the overnight trip.

A trial court dismissed the lawsuit. It concluded that neither the national, nor the regional, scouting organization were guilty of negligent hiring and retention because, first, the national organization never had employed him and, second, the regional organization no longer employed him when he inflicted the injuries for which the mother sought relief. Second, the court determined that the scouting defendants “adequately executed all voluntary protective measures that they undertook.” The mother appealed.

The appeals court’s decision

The appeals court affirmed the dismissal of the negligence claims against the national scouting organization. It noted that “Illinois law recognizes a cause of action against an employer for negligently hiring, or retaining in its employment, an employee it knew, or should have known, was unfit for the job so as to create a danger of harm to third persons.” The court concluded that the national scouting organization could not be liable on the basis of negligent hiring or retention since “there is no indication in the record that any employment relationship existed between it and the defendant.” The court concluded:

In fact, the scouting professionals who were queried on the matter unequivocally maintained that the defendant was employed by [the regional scouting organization], not BSA. Plaintiff claims, however, that BSA was “inextricably intertwined” with the regional organization in the process leading to the defendant’s hiring, as BSA acted as “the clearinghouse for local councils” and had the “final say over any hire.” Thus, according to plaintiff, BSA “effectively hired the defendant.” We disagree. We know of no “effective” employment relationship under Illinois law except that which is determined by the following factors: “the right to control the manner in which the work is performed; the right to discharge; the method of payment; whether taxes are deducted from the payment; the level of skill required to perform the work; and the furnishing of the necessary tools, materials, or equipment.” While no one single factor is considered determinative, the right to control the work is considered to be the predominant factor. Plaintiff does not discuss these factors, and it is apparent that the most significant factor, namely, the right to control the work, weighs against finding an employment relationship between BSA and the defendant. He reported to the regional organization, not BSA. Therefore, we hold that, as a matter of law, BSA was not the defendant’s employer for purposes of the tort of negligent hiring and retention.

The court acknowledged that the regional scouting organization was the defendant’s employer, however it stressed that the injuries to the victim “occurred after the defendant voluntarily terminated his employment.” The mother “has cited no authority, Illinois or otherwise, for holding an employer liable, under the tort of negligent hiring and retention, for an employee’s post-termination acts. Our own research has disclosed no Illinois decision where a negligent-hiring-and-retention claim was based on post-termination acts.” Further, the court observed:

Liability for negligent hiring arises only when a particular unfitness of an applicant creates a danger of harm to a third person which the employer knew, or should have known, when he hired and placed this applicant in employment where he could injure others. This language suggests that the purpose of the tort is to prevent injuries that occur during the term of employment and, consequently, suggests that the employer’s duty of care does not extend beyond the cessation of employment.

The court noted that even if Illinois law extended liability for negligent hiring and retention to post-employment actions, the mother had failed to prove that the scouting organizations were negligent.

First, on the issue of the hiring of the defendant, the only information that plaintiff claims the scouting organizations would have uncovered had they fulfilled their duty to carefully screen applicants was (1) the defendant’s discharge from the Navy for suspected homosexuality and drug activity and (2) his DWI. In her briefs, plaintiff does not articulate how such facts would have made it reasonably foreseeable that the defendant would sexually molest young boys. Rather, plaintiff merely insinuates that the presence of a “young man” in the car with [the defendant] when he was arrested for DWI indicated some sexual impropriety. The “young man” was, in fact, 18 years old. Plaintiff’s insinuation is simply unwarranted … .

On the issue of negligent retention, plaintiff contends that the negligence consisted of the regional scouting organization’s inaction after the volunteer informed a scout leader of how the defendant behaved in the locker room at the YMCA … . We cannot agree … . The defendant’s conduct at the YMCA was not so clearly prurient, and did not signal such an immediate danger to scouts, as to warrant depriving him of any opportunity to explain himself. Such an explanation might have reasonably persuaded the scouting organizations that his actions were wrongly perceived.

What This Means For Churches:

This case is directly relevant to church leaders for the following reasons:

First, the court concluded that youth-serving organizations are not liable for the post-termination acts of volunteers and employees that do not occur during sanctioned activities. The defendant voluntarily terminated his employment with the regional scouting organization prior to his molestation of the victim, and those acts did not occur during sanctioned scouting activities.

Second, this case demonstrates that national youth-serving organizations, including religious denominations, ordinarily cannot be liable on the basis of negligent hiring or retention for the wrongful acts of workers in local affiliates.

Third, the mother mentioned the defendant’s frequent photographing of young boys as evidence that he might be a pedophile. The court did not respond to this argument. Perhaps it should have. The FBI “profile” of child molesters (“Child Molesters: A Behavioral Analysis”) lists several characteristics of pedophiles, but notes that taking frequent photos of children is perhaps the most telling characteristic: “This includes photographing children fully dressed. One pedophile bragged that he went to rock concerts with 30 or 40 rolls of film in order to photograph young boys. After developing the pictures he fantasized about having sex with the boys. Such a pedophile might frequent playgrounds, youth athletic contests, child beauty pageants, or child exercise classes with his camera (i.e., 35mm, video, digital).” The FBI profile continues:

Collecting this material may help them satisfy, deal with, or reinforce their compulsive, persistent sexual fantasies. Some child erotica is collected as a substitute for preferred but unavailable or illegal child pornography.

Collecting may also fulfill needs for validation. Many preferential sex offenders collect academic and scientific books and articles on the nature of their paraphilic preferences in an effort to understand and justify their own behavior. For the same reason, pedophiles often collect and distribute articles and manuals written by pedophiles in which they attempt to justify and rationalize their behavior. In this material pedophiles share techniques for finding and seducing children and avoiding or dealing with the criminal-justice system.

Preferential sex offenders get passive validation from the books and articles they read and collect. Many preferential sex offenders swap pornographic images the way boys swap baseball cards. As they add to their collections, they get strong reinforcement from each other for their behavior. The collecting and trading process becomes a common bond. Preferential sex offenders get active validation from other offenders, some victims, and occasionally from undercover law-enforcement officers operating “sting” operations. The Internet makes getting active validation easier than ever before. Fear of discovery or identification causes some offenders to settle only for passive validation.

The need for validation may also partially explain why some preferential sex offenders compulsively and systematically save the collected material. It is almost as though each hour spent on the Internet and each communication and image is evidence of the value and legitimacy of their behavior. For example one offender sends another offender a letter or E-mail enclosing photographs and describing his sexual activities with children. At the letter’s or E-mail’s conclusion he asks the recipient to destroy the letter or E-mail because it could be damaging evidence against him. Six months later law enforcement finds the letter or E-mail—carefully filed as part of the offender’s organized collection. Offenders’ need for validation is the foundation on which proactive investigative techniques (e.g., stings, undercover operations) are built, and it is also the primary reason they work so often. In a letter or during Internet correspondence an offender states that he suspects the recipient is an undercover law-enforcement officer and asks for assurances that the recipient is not. The recipient who is in fact an undercover officer sends a reply assuring the offender that he is not. The offender accepts his word and then proceeds to send child pornography and make incriminating statements.

Although their brains may tell them not to send child pornography or reveal details of past or planned criminal acts to someone they met online, their need for validation often compels them to do so. They believe what they need to believe. Some of the theme pornography and erotica collected by preferential sex offenders is saved as a souvenir or trophy of the relationships with victims. All child victims will grow up and become sexually unattractive to the pedophile. In a photograph, however, a 9-year-old child stays young forever. This is one reason why many pedophiles date and label their pictures and videotapes of children. Images and personal items become trophies and souvenirs of their relationships—real or fantasized.

The offenders’ needs to validate their behavior and have souvenirs of their relationships are the motivations most overlooked by investigators when evaluating the significance of the pornography and erotica collections of pedophiles and other preferential sex offenders.

The point is clear—church leaders should be wary of any individual who takes pictures of minors in any church activity or event without a reasonable justification (i.e., a parent taking pictures of her child). Doe v. Boy Scouts of America 4 N.E.3d 550 (Ill. App. 2014).

Legal Developments

Church Not Responsible for Rape of Teenage Girl by Camp Worker

Court says church and camp exercised sufficient care in selection and supervision of worker.

Church Law and Tax Report

Church Not Responsible for Rape of Teenage Girl by Camp Worker

Court says church and camp exercised sufficient care in selection and supervision of worker.

Richard R. Hammar

A North Carolina appeals court ruled that a church was not responsible on the basis of negligence for the rape of an adolescent camper by an adult worker at a church camp. The court concluded that the church and camp had exercised sufficient care in the selection and supervision of the worker to rebut the allegation of negligence. A 16-year-old female (the “victim”) attended a summer camp owned and operated by a national religious denomination and a regional affiliate (the “church defendants”). On the last night of camp, an activity called “the Game” was conducted. The purpose of the Game was for campers to sneak around camp staff members through a wooded area, in the dark, and ring a bell located at the top of a hill. The Game was restricted to senior high campers. All participants were required to play with partners for safety purposes. The victim and a friend were partners, and at some point during the evening they met two male camp staff members. The victim’s friend and one of the staff members left together, leaving the victim and the other staff member. The victim claimed that the staff member raped her.

After this incident, the victim returned to a camp dining hall. She did not report what happened to anyone at the camp or make any complaint regarding the assault until several months later. When confronted with the allegation, the assailant initially denied the sexual encounter but later claimed the encounter was consensual.

The victim and her father sued the church defendants, claiming they were responsible for the rape on the basis of negligence in their hiring, retention, and supervision of the staff member. In addition, the complaint alleged the defendants negligently failed to provide the victim with a safe environment when it conducted the Game. Plaintiffs also alleged that, as a result of defendants’ negligence, the victim suffered severe emotional distress. A trial court dismissed the claims against the church defendants, and the plaintiffs appealed.

The appeals court began its opinion by noting that negligence requires proof that a defendant owed the plaintiff a duty of reasonable care, and a breach of that duty. The court agreed with the plaintiffs that the church defendants owed the victim a duty of care:

We hold that camps and their employees have a duty to their campers to exercise the same standard of care that a person of ordinary prudence, charged with the duty of supervising campers, would exercise under the same circumstances. Moreover … this duty of care is relative to the camper’s maturity. Thus, the foreseeability of harm to the individual camper is the relevant test which defines the extent of the duty to safeguard campers from the dangerous acts of others.

The plaintiffs insisted that the church defendants breached this duty of care in the following ways: (1) the Game occurred in a wide, heavily wooded area; (2) the Game occurred late at night; (3) adult camp staff participated in the Game with minor campers; and (4) the executive director, assistant director, and camp director did not supervise the Game.

But, the court pointed out, there were several facts supporting the church defendants’ claim that they did not breach a duty of care:

At the time the Game was played, the victim was 16 years old. Defendants specifically restricted the Game to senior high campers and required them to be with a partner while playing the Game for safety purposes. In addition, adult camp counselors and staff members were present as participants in and supervisors of the Game. These procedural safeguards adequately establish that defendants acted reasonably in their supervision of the Game, particularly in light of the maturity level of the senior high campers who participated in it. Thus, defendants did not breach their duty to the victim by conducting the Game.

The plaintiffs also claimed that the church defendants were negligent because they failed to adequately train the staff member who raped the victim. Specifically, they alleged that defendants (1) failed to have written rules prohibiting relationships between staff and campers; (2) failed to teach the assailant and staff that they should never be alone with a camper; and (3) failed to communicate that certain types of interactions with campers were prohibited. To support their allegations, the plaintiffs submitted an affidavit from a summer camp consultant and author of a book explaining the best practices for camp staff. The affidavit states:

The policies and procedures [of defendants’ camp] are below the standard of care applicable to a summer camp and do not conform to industry best practices. They do not include a clear statement prohibiting a staff member from being alone with a camper, and they demonstrate a disregard for the principle that at least two staff members must be present when working with campers. There was a clear lack of training and ongoing culture of improving and learning with an emphasis on the safety of children or the inappropriateness of staff to camper relationships.

The court noted that the consultant’s opinion was based “solely on his review of the camp’s written policies and procedures,” and that “several of defendants’ staff members testified that they were orally instructed that two staffers must be present at all times when dealing with campers and that they were also warned to be very careful about any physical or romantic relationships with campers.” Most importantly, the assailant himself submitted an affidavit in which he stated that he knew his conduct with the vicitm was “against camp policies,” and “inappropriate and prohibited.” In summary, while the consultant’s affidavit “may create an issue of fact regarding whether defendants had an adequate written policy regarding sexual relationships between camp staff and campers, it does not establish that no such policy existed. On the contrary, the undisputed evidence is that camp staff members were made aware that sexual relationships with campers were prohibited.”

The court noted that prior to his employment, the assailant provided a personal disclosure indicating he had no criminal convictions, that he had never been dismissed, suspended, or asked to resign from a job, and that he had never had a complaint lodged against him for sexual molestation, abuse, or harassment. Additionally, the church defendants checked the National Sex Offender Registry to ensure he was not disqualified from employment. Defendants also received a favorable recommendation in a telephone interview with a trusted reference. Finally, the assailant was hired in 2007 and his employment was very positive that summer. Based on the prior investigation, and his positive performance in 2007, he was re-hired for the summer of 2008 (the summer that the rape occurred).

The court concluded:

Taken together, this undisputed evidence demonstrates as a matter of law that defendants acted reasonably in its training and hiring of the assailant and that his conduct which harmed the victim was unforeseeable by defendants … . Defendants did not breach their duty of care to the victim by failing to maintain a safe environment at the camp. There was no evidence which would have allowed defendants to anticipate the assailant’s actions towards the victim or take additional reasonable steps to prevent them. Since there are no genuine issues as to any material facts, the trial court properly granted defendants’ motion for summary judgment.

What This Means For Churches:

This case is instructive, for it illustrates the kinds of precautions that churches, camps, and youth-serving charities can take to satisfy their duty of care in the selection of youth workers and the supervision of youth activities. In summary, the court concluded that the church defendants had not breached their duty of care to the victim, and therefore were not responsible on the basis of negligence for the staff member’s conduct, because of the following factors:

The church defendants restricted the Game to senior high campers.

Participants in the Game were required to be with a partner.

Adult camp counselors and staff members were present as participants in, and supervisors of, the Game.

While the camp’s written policies and procedures may have been inadequate, several staff members testified they were orally instructed that two staffers must be present at all times when dealing with minor campers.

Adult camp staffers were orally warned to avoid any physical or romantic relationships with minor campers.

The church defendants used a written application when selecting adult camp staff, which asked applicants to disclose (1) any criminal convictions; (2) if they had ever been dismissed, suspended, or asked to resign from a job; and (3) if they had ever had a complaint lodged against them for sexual molestation, abuse, or harassment.

The church defendants checked the National Sex Offender Registry to ensure adult camp staffers were not registered sex offenders.

The church defendants received a favorable recommendation in a telephone interview with a trusted reference.

The assailant had a track record. He had been hired for the previous camp season, giving the church defendants an opportunity to assess his fitness and suitability for working with minors. His performance was exemplary, with no hint of misconduct. Nowlin v. Moravian Church in America, 745 S.E.2d 51 (N.C. App. 2013).

Legal Developments

Local Church Retains Control of Property

Court denies Episcopal national church ownership of building used by newly dissociated church.

Richard R. Hammar, Attorney, CPA

Bio

State: Texas
Categories: Denominations - Legal Liability

Key point 7-03.3. Most courts apply the "neutral principles of law" rule in resolving disputes over the ownership and control of property in "hierarchical" churches. Under this rule, the civil courts apply neutral principles of law, involving no inquiry into church doctrine, in resolving church property disputes. Generally, this means applying neutral legal principles to nondoctrinal language in any one or more of the following documents: (1) deeds to church property; (2) a church's corporate charter; (3) a state law addressing the resolution of church property disputes; (4) church bylaws; or (5) a parent denomination's bylaws.

The Texas Supreme Court ruled that a church that withdrew from the national Episcopal Church retained control of its property in a dispute with the national church.

Due to doctrinal differences with the Episcopal Church ("national church"), some members of a local Episcopal church (the "church") proposed disassociating from the national church and organizing as an independent church. The church conducted a called meeting during which the following resolutions were presented: (1) amend the corporate bylaws to, among other changes, remove all references to the national church; (2) withdraw the local congregation's membership in and dissolve its union with the national church; (3) revoke any trusts that may have been imposed on any of its property by the national church. The resolutions passed by a vote of 53 to 30.

After the parish vote, the local diocese of the national church took the position that the church could not unilaterally disassociate from the Diocese and that the vote did not have any effect on the church's relationship with the diocese or national church. The diocese held a meeting with the faction of the church loyal to the national church and appointed a new priest. The loyal faction elected a board (vestry), and the diocese recognized the loyal faction as the legitimate church.

Nevertheless, the withdrawing faction continued to use the parish property, so two vestry members of the loyal faction and the diocese asked a local court for a ruling recognizing the loyal faction as the true church, and affirming that all the parish property was held in trust for the national church. The national church filed a motion for summary judgment. It asserted that the Episcopal Church is a hierarchical church; its canons and rules provide that all property of a parish is held in trust for use of the national church and the respective diocese; and, when congregations of hierarchical churches split, Texas courts defer to the decisions of the church's superior hierarchical authority as to which faction comprises the true church.

In support of its position, the national church noted that in 1979 it amended its canons, adding Canon I.7.4 (often referred to as the "Dennis Canon") and I.7.5 for the purpose of placing church property in trust:

Section I.7.4. All real and personal property held by or for the benefit of any Parish, Mission or Congregation is held in trust for this Church and the Diocese thereof in which such Parish, Mission or Congregation is located. The existence of this trust, however, shall in no way limit the power and authority of the Parish, Mission or Congregation otherwise existing over such property so long as the particular Parish, Mission or Congregation remains a part of, and subject to, this Church and its Constitutions and Canons.

Section I.7.5. The several Dioceses may, at their election, further confirm the trust declared under the foregoing Section 4 by appropriate action, but no such action shall be necessary for the existence and validity of the trust. (Emphasis added).

The trial court granted the national church's motion for summary judgment, and this ruling was affirmed by a state appeals court. The case was appealed by the dissident faction to the Texas Supreme Court.

The Texas Supreme Court began its opinion by observing: "The question before us is what happens to the property when a majority of the membership of a local church votes to withdraw from the larger religious body of which it has been a part." The court noted that there are at least two methods for resolving church property disputes without violating the First Amendment guaranty of religious freedom—"deference" and "neutral principles of law."

Deference

The court noted that "whenever the questions of discipline, or of faith, or ecclesiastical rule, custom, or law have been decided by the highest of [the] church judicatories to which the matter has been carried, the legal tribunals must accept such decisions as final, and as binding on them" (quoting the decision of the United States Supreme Court in Watson v. Jones, 80 U.S. 679 (1872)). The deference rule is mandatory in such cases.

The court conceded that "differences between ecclesiastical and non-ecclesiastical issues will not always be distinct, and that many disputes of the type before us will require courts to analyze church documents and organizational structures to some degree. Further, deferring to decisions of ecclesiastical bodies in matters reserved to them by the First Amendment may, in some instances, effectively determine the property rights in question."

The court concluded that "absent specific, lawful provisions in a corporation's articles of incorporation or bylaws otherwise, whether and how a corporation's directors or those entitled to control its affairs can change its articles of incorporation and bylaws are secular, not ecclesiastical, matters."

Neutral principles of law

While the judicial deference to church authority is mandatory in disputes involving "discipline, faith, or ecclesiastical rule, custom, or law," this is not necessarily the case in church property disputes that do not implicate such issues. If a church property dispute can be resolved without inquiring into church doctrine or practice, then there are several potential ways for the courts to intervene. The Texas Supreme Court noted that the neutral principles of law approach was one such method, and it officially sanctioned it as the applicable rule for the resolution of church property disputes by Texas courts so long as the deference rule does not apply.

What, then, is the neutral principles of law approach to resolving church property disputes that do not implicate church doctrine? The court explained: "Under the neutral principles methodology, ownership of disputed property is determined by applying generally applicable law and legal principles. That application will usually include considering evidence such as deeds to the properties, terms of the local church charter (including articles of incorporation and bylaws, if any), and relevant provisions of governing documents of the general church."

The national church insisted that, under the neutral principles of law approach, the courts should apply the Dennis Canon, and award title to the national church or diocese. In support of this argument, the national church claimed that, according to the United States Supreme Court's decision in Jones v. Wolfe, 443 U.S. 595 (1979), "a superior hierarchical church organization's amendment to its constitution to include a trust provision is sufficient to establish a trust in property held by its subordinate churches." The national church pointed to the following excerpt from the Supreme Court's ruling in Jones:

At any time before the dispute erupts, the parties can ensure, if they so desire, that the faction loyal to the hierarchical church will retain the church property. They can modify the deeds or the corporate charter to include a right of reversion or trust in favor of the general church. Alternatively, the constitution of the general church can be made to recite an express trust in favor of the denominational church. The burden involved in taking such steps will be minimal. And the civil courts will be bound to give effect to the result indicated by the parties, provided it is embodied in some legally cognizable form.

The court disagreed that the Dennis Canon was dispositive, for several reasons. First, the national church's pleadings and briefs only claimed that the church's property was retained by the national church as a result of the deference rule. The status of the property under the neutral principles of law approach was not addressed. Since the court rejected the deference rule in church property disputes, the national church's appeal to the deference rule was unavailing.

Second, if the effect of the Dennis Canon was to award title to the church property to the faction loyal to the national church, this "would subject the corporation's decision makers and the parish members who were qualified to vote under the bylaws to the dictates of persons not identified in corporate governing documents as having the right to make, control, or override corporate decisions." In this regard, the court added that when the church incorporated in 1974, the state nonprofit statute provided that "the power to alter, amend, or repeal the bylaws or to adopt new bylaws shall be vested in the members, if any, but such power may be delegated by the members to the board of directors." No provision empowered an "external entity … to amend them absent specific, lawful provision in the corporate documents," and there was no such provision in the church's bylaws.

Third, the court stressed that the church "was incorporated pursuant to Texas corporation law and Texas law dictates how the corporation can be operated, including how and when corporate articles and bylaws can be amended and the effect of the amendments." The court found no provision in the church's articles of incorporation or bylaws requiring amendments to be subject to the approval of the diocese or national church. To the contrary, the articles of incorporation and bylaws specified that "qualified parish members were entitled to elect the vestry and amend the bylaws."

Fourth, the court noted that "even assuming a trust was created by the Dennis Canon … we disagree that the Canon's terms make the trust expressly irrevocable as Texas law requires … . The Canon simply does not contain language making the trust expressly irrevocable … . Even if the Canon could be read to imply the trust was irrevocable, that is not good enough under Texas law. The Texas statute requires express terms making it irrevocable."

Fifth, the court noted that the national church "did not cite Texas law to support their argument that under the [church] was precluded from revoking any trusts actually or allegedly placed on its property."

Two justices dissented from the court's opinion. These justices would have awarded title of the church property to the national church. One reason for doing so was the doctrine of estoppel. They explained:

Alternatively, I believe the [national church] prevails under the doctrine of quasi-estoppel. The [national church] did not formally plead quasi-estoppel as an affirmative defense, though they did allege facts to support it. The summary judgment evidence establishes the applicability of the doctrine and precludes [the church] from claiming that it may revoke the trust in conjunction with its withdrawal from the national church. Quasi-estoppel precludes a party from asserting, to another's disadvantage, a right inconsistent with a position previously taken. The doctrine applies when it would be unconscionable to allow a person to maintain a position inconsistent with one to which he acquiesced, or from which he accepted a benefit … . Prior to [this dispute, the church] had promised conformity to the national church's doctrine and to its Constitutions and Canons; had accepted grants as well as no-interest and low-interest loans from the national church and the Diocese to assist in building the church; had declared that the church property was "secured from the danger of alienation … from those who profess and practice the Doctrine, Discipline, and Worship of this [Episcopal] Church"; and had accepted the conveyance of the property from the Diocese after the property trust provisions were added to Canons. Having made these promises and accepted these benefits [the church] may not now contend it is free to disregard these positions because a majority of its members have voted to do so.

The Texas Supreme Court rejected this argument, noting that "summary judgment may only be granted based on grounds pleaded and expressly presented in a motion for summary judgment. The national church neither pleaded estoppel nor urged it as a ground for summary judgment." So, the court rejected this potentially decisive argument on the ground that the national church failed to raise it in its motion for summary judgment.

What this means for churches

Note the following implications of this ruling:

First, the neutral principles of law approach to resolving church property disputes is now the official way for Texas courts to resolve such disputes.
Second, the deference rule requires civil courts to defer to the decisions of church bodies on matters of faith and polity.
Third, the court's ruling was not a ruling on the merits. Rather, the court was reversing the trial and appellate courts' award of summary judgment in favor of the national church. The court's ruling sends the dispute back to the trial court for trial. It is possible that the trial court, and appellate court, would again rule in the national church's favor.
Fourth, the court rejected the national church's estoppel argument since it had not been raised in its pleadings. Presumably, this argument can be raised in the trial court.
Fifth, the national church's pleadings and briefs only claimed that the church's property was retained by the national church as a result of the deference rule. The status of the property under the neutral principles of law approach was not addressed. Since the court rejected the deference rule in church property disputes, the national church's appeal to the deference rule was unavailing. The national church will have the opportunity to address its interpretation of neutral principles of law on remand of the case to the trial court.
Sixth, as the court noted, several other courts have reached the opposite conclusion and awarded title to the property of dissident Episcopal churches to the denomination. Masterson v. Diocese of Northwest Texas, 2013 WL 4608632 (Tex. 2013).

Legal Developments

Boy Scouts Had Legal Duty to Disclose Molestation

Its failure to do so could expose liability for individual acts of molestation.

State: Federal
Categories: Denominations - Legal Liability, Sexual Misconduct by Clergy, Lay Employees, and Volunteers

Key point 10-13.1. A few courts have found churches and denominational agencies liable on the basis of a breach of a fiduciary duty for the sexual misconduct of a minister. In some cases, the church or agency is found to be vicariously liable for the minister's breach of a fiduciary duty, but in other cases, the church or agency is found to have breached a fiduciary duty that it had with the victim.

A federal district court in Idaho ruled that the Boy Scouts of America had a legal duty to disclose to the public the risk of child molestation in scouting programs, and that its failure to do so could expose it to liability for individual acts of molestation. An adult male (the "plaintiff") was a member of a church-based Boy Scouts troop when he was a minor during the years 1965 through 1971. He claimed that he was repeatedly sexually abused by his scoutmaster on various overnight trips and day trips. Only the plaintiff and scoutmaster participated on some of these trips, which typically involved fishing and searching for campsites for the troop.

In 2008, when he was 55 years old, the plaintiff sued national and regional organizations of the Boy Scouts of America (BSA), and the church that hosted his former scout troop. He claimed that the BSA organizations and church knew about the danger of abuse. But instead of disclosing this danger to him, they promoted scouting as a safe, trustworthy, and fun activity for boys. According to the plaintiff, the BSA organizations and church also represented that the perpetrator was a trusted youth leader worthy of his scoutmaster role, despite knowing that he had previously molested another boy.

In short, the plaintiff asserted that the BSA organizations, and host church, had a relationship of trust and confidence that imposed upon them a "duty to disclose" the general danger of child molestation inherent in scouting.

The plaintiff's lawsuit claimed that the BSA "has always had a known problem with adult volunteers abusing scouts." In the early 1900s, the BSA began keeping "Ineligible Volunteer Files" on individuals banned from volunteering in scouting. The "Perversion" category contains the most files and comprises any type of sexual misconduct, including child abuse. Before the plaintiff became a Scout, the BSA had compiled "thousands of incidents of child abuse" within scouting involving its adult volunteers. And by the time the plaintiff joined scouting, BSA was creating approximately 40 to 60 Perversion files each year.

The plaintiff further claimed that the BSA and church had specific notice that the perpetrator was a child molester and danger to children. In 1964, a church member told a church official that his son, a scout in the same troop, had also been molested by him. The church official allegedly responded that he would "take care of it." And a week later, he told the father that he "had taken care of it."

The plaintiff's lawsuit asserted that the BSA organizations, and host church, were liable for the scoutmaster's acts on the basis of "constructive fraud." The court explained this basis of liability as follows: "An action in constructive fraud exists when there has been a breach of a duty arising from a relationship of trust and confidence, as in a fiduciary duty … . To prove constructive fraud, a party must prove the existence of a confidential relationship. When a confidential relationship is found to exist, the one in whom confidence was reposed may be held to a higher standard of disclosure and fairness than in an arm's-length relationship."

The court concluded that a confidential relationship existed between the plaintiff and the BSA organizations and host church, based on four factors:

(1) he was a minor child when he was allegedly abused; (2) he was an active and regular participant in camping trips and other activities provided through a church-sponsored organization; (3) he was strongly encouraged by the church to participate in those camping trips and activities; and (4) the church allegedly knew of the specific danger that the scoutmaster posed. Also, the church taught the plaintiff to respect and trust his church and scout youth leaders. And presumably, his parents trusted the scoutmaster enough, in his role as a church and scout leader, to allow him to take the plaintiff on overnight camping trips and individual day trips. On these scouting trips, the parents entrusted the perpetrator to ensure their son's safety and act as his caretaker.

What This Means For Churches:
This case is important for two reasons. First, the court insinuated that the church and BSA organizations could be liable for a 50-year-old case of child molestation because at, or prior to, the time the victim became involved in scouting they failed to "disclose" to him, and more generally to the public, that child molestation by scoutmasters was a risk that parents should consider before allowing their children to participate in scouting. This extraordinary conclusion will expose youth-serving charities to liability for their actions decades ago based on modern-day standards of proper care.

Second, the court concluded that the pastor could be viewed as an "agent" of the national and regional BSA organizations, and as a result, the father's disclosure to a church official that his son had been molested by the same scoutmaster who molested the plaintiff could be imputed to the BSA organizations, even though they lacked any direct knowledge of the incident. Doe v. Presiding Bishop, 2012 WL 3782454 (D. Idaho 2012).

Legal Developments

Court Applies “Ministerial Exception” to Church Discrimination Case

Employee discrimination claim left to church’s decision.

Richard R. Hammar, Attorney, CPA

Bio

State: California
Categories: Denominations - Legal Liability, Employment Practices, Sexual Misconduct by Clergy, Lay Employees, and Volunteers

Church Law & Tax Report

Court Applies “Ministerial Exception” to Church Discrimination Case

Employee discrimination claim left to church’s decision.

Richard R. Hammar, J.D., LL.M., CPA

Key point 8-10.1. The civil courts have consistently ruled that the First Amendment prevents the civil courts from applying employment laws to the relationship between a church and a minister.

Key point 8-12.1. Title VII of the Civil Rights Act of 1964 prohibits employers engaged in commerce and having at least 15 employees from discriminating in any employment decision on the basis of race, color, national origin, gender, or religion. Religious organizations are exempt from the ban on religious discrimination, but not from the other prohibited forms of discrimination.

Key point 8-12.4. Title VII of the Civil Rights Act of 1964 prohibits employers engaged in commerce and having at least 15 employees from discriminating in any employment decision on the basis of race, color, national origin, gender, or religion. The Act permits religious organizations to discriminate in employment decisions on the basis of religion. This exemption permits such organizations to discriminate on the basis of moral or scriptural standards so long as they do consistently and not in a way that adversely impacts employees who are members of a group that is protected under an applicable state or federal discrimination law.

A California appellate court ruled that it was barred by the “ministerial exception” from resolving the discrimination claims of a church preschool director who was terminated on the basis of her decision to live with her boyfriend without the benefit of marriage. A preschool operated by a Lutheran church required its teachers to sign a document prior to the start of each school year setting forth professional expectations. The preschool director (the “plaintiff”), who had teaching responsibilities, was required to sign the form. The plaintiff knew the school was “Bible-based.” Although teachers were not required to attend the church, or be Lutheran (the plaintiff is Catholic) they were required to be practicing Christians “involved in a church-based setting on a regular basis.”

The parents of students did not have to be Lutherans, but they, too, had to be practicing Christians.

As director of the preschool, the plaintiff made the classroom arrangements, helped hire teachers, and scheduled their hours and classroom assignments. She also processed the applications for incoming students and made sure the school complied with state mandates. Every week she gave a tour of the preschool to parents of prospective students. During the tour she talked to the parents about the “Christian-based, Bible-based values of the school.” She wanted the parents to understand that if they sent their children to the school, they could expect their children to receive a “Christian education” and Biblebased “Christian values.”

Every week the teachers participated in devotions. They read from a devotional book, took prayer requests from the group, and prayed for each other. As a teacher, the plaintiff taught religion to the preschoolers as a part of the regular curriculum. She spoke to the children about Jesus on a daily basis. Two or three times a week she taught a Bible story in conjunction with the theme being taught that week. The plaintiff claimed that the Christian themes she introduced related to Christianity in general and “not specifically to Lutheran doctrine or teachings.” On occasion when the need to discipline a child arose, she would “bring in some theme from a Bible story or a teaching of Christianity.”

Every Wednesday the preschool classes and their teachers attended chapel for about half an hour. The plaintiff was in charge of the chapel service three to four times a school year. The responsibility of reading a Bible story or performing some other act of religious teaching during chapel rotated among the teachers. The plaintiff led her class in prayer each day: at the beginning of each day, before each meal, and at the end of each day. The plaintiff estimated she spent one hour a week teaching religion, another hour leading the children in prayer, and the remainder of the time she spent teaching—other than those times she was in charge of the chapel service—was spent on “secular subjects, including such things as: numbers and counting; the alphabet and letter concepts; basic science; small motor control; large motor control; social, emotional, physical and language skills; and computer skills.”

The plaintiff was married when she applied to the school for a teaching position. She subsequently divorced and gave birth to a child fathered by her boyfriend. While she was pregnant, she told representatives of the church that she intended to get married, but was not ready to do so just yet. She returned to the school for the following school year. She stated that she believed the school would not punish her for having had a baby out of wedlock. She lived with her boyfriend prior to having the baby, but did not know whether the principal of the school was aware they were living together.

Eventually, the church’s pastor met with the plaintiff. They discussed her living with her boyfriend and he asked whether she intended to marry him. The plaintiff said she and her boyfriend intended to get married, but did not know when. She understood that her living arrangement was “contrary to the religious and moral beliefs of the church.” The plaintiff knew before she became pregnant that living with boyfriend was contrary to the teachings of the Bible.

The school terminated the plaintiff’s employment for living with her boyfriend and raising their son together without being married, a “failure to adhere with the professional expectations of the teaching staff in that her living arrangements were contrary to the religious beliefs of the church and school.”

The plaintiff sued the church, alleging that the church terminated her employment based upon her marital status, in violation of Title VII of the Civil Rights Act of 1964. The court entered judgment in the church’s favor on the ground that the church is a religious institution, and that the plaintiff’s employment was terminated because she violated a church precept. The plaintiff appealed.

Title VII

The plaintiff insisted that “the law does not allow the church to discriminate against non-ministerial employees based on gender or marital status.” But the court pointed out that Title VII does not bar employment discrimination based on marital status, and that the plaintiff failed to cite any law declaring a public policy against marital status discrimination.

The trial court found the church terminated the plaintiff’s employment because she violated a church precept. According to the church, the plaintiff’s employment was terminated not because she had a baby out of wedlock, and not because she remained unmarried, but because she continued to live with her boyfriend in a sexual relationship while unmarried. The court concluded that the evidence supported the church’s position:

After the plaintiff’s marriage ended, she lived with her boyfriend and became pregnant. There is no evidence the school’s principal or the church knew of the plaintiff’s living situation at that time. The church did not terminate her employment for being pregnant. Neither did it fire her when she had the baby out of wedlock. In fact, she gave birth to her son in June 2007 and went back to teaching at the beginning of the next school year, 2007-2008. The plaintiff testified she knew she would not be punished for having had a baby. It was only at the end of 2008, when the principal became aware that parents of children at the school knew of and were talking about the plaintiff living with her boyfriend and raising their child out of wedlock, that the plaintiff was informed by the school that she had to make a choice. The plaintiff knew she was expected to live by the teachings of the Bible and that her living arrangement was “contrary to the religious and moral beliefs of the church.”

Had the plaintiff decided to marry her boyfriend, the church would have been satisfied. But the church would also have been satisfied and the plaintiff would have kept her job even if she decided against marrying him. She could have moved out of their shared residence. In fact, after the plaintiff explained to the school board her hesitancy to remarry, one of the school board members specifically asked her, “Why do you have to live with him?” What the church could not allow was to have the plaintiff, its face and representative to the students and parents of the students who attended its school, to continue living in what it considered a sinful manner. In other words, if the plaintiff stopped living with her boyfriend she could continue in her job. That being the case, the evidence at trial indicates her employment was terminated based upon a matter of religion, not her sex and not her having had a baby out of wedlock.

The court noted that Title VII bans employment discrimination based on race, color, national origin, gender, and religion, but exempts religious organizations “from Title VII liability on the basis of religious discrimination.” Under Title VII’s religious exemption, “the decision to employ individuals of a particular religion … has been interpreted to include decisions to terminate an employee whose conduct or religious beliefs are inconsistent with those of its employer.” The court continued:

Whereas a religious organization’s termination of an employee’s employment for becoming pregnant would violate Title VII, terminating the employment because the employee committed adultery—a violation of the religious organization’s requirement that the employee live a life in conformity with the fundamentalist beliefs of the church would not be a violation. In this case, the evidence at trial supports a finding that the plaintiff’s employment was terminated because she was living with her boyfriend in a sexual relationship and was raising their child in that living arrangement, and not because she was a woman or became pregnant or had a baby out of wedlock. As the plaintiff admitted on cross-examination, she understood that “living with [her] child’s father and not being married was contrary to the school and church’s expectation of [her] as a Christian, setting a Christian role model.” The judgment in favor of defendant does not violate any public policy rooted Title VII.

the ministerial exception

The court next addressed the church’s claim that the “ministerial exception” barred civil court resolution of the plaintiff’s claims. The court explained the ministerial exception as follows:

The ministerial exception doctrine is based on the notion a church’s appointment of its clergy, along with such closely related issues as clerical salaries, assignments, working conditions and termination of employment, is an inherently religious function because clergy are such an integral part of a church’s functioning as a religious institution. Therefore, secular courts will not attempt to right wrongs related to the hiring, firing, discipline or administration of clergy. Implicit in this statement of the rule is the acknowledgment that such wrongs may exist, that they may be severe, and that the administration of the church itself may be inadequate to provide a remedy. The preservation of the free exercise of religion is deemed so important a principle as to overshadow the inequities which may result from its liberal application. In our society, jealous as it is of separation of church and state, one who enters the clergy forfeits the protection of the civil authorities in terms of job rights.

Dismissing an Employee for Violation of a Church’s Moral Teachings

Before dismissing an employee for violating the church’s moral teachings, church leaders should ask the following questions:

Is there sufficient evidence to support our decision?
Did we inform the employee, in an employee handbook or other document, that he or she would be subject to dismissal for engaging in behavior in violation of our moral teachings?
How will we describe the basis for our decision? The best description will refer to the church’s doctrinal tenets, and scriptural citations. Stay away from words such as “pregnancy” that can have a “secular” meaning, and that diminish the “religious exemption” available to churches under most federal and state civil rights and employment laws.
How have we treated other employees in the past who were guilty of the same kind of misconduct? Have we treated all employees equally? Or, have we treated some employees less favorably than others? For example, have we dismissed female employees who were guilty of extramarital sexual relations, but only warned or reprimanded male employees guilty of the same behavior? Before dismissing an employee for misconduct, church leaders should review all other known cases involving similar misconduct by other employees. Be sure that an employee who is protected against discrimination by state or federal law is not treated less favorably than other employees in previous cases.
Have we consulted with an attorney before taking final action?

The court explained that the ministerial exception is not limited to churches, but extends to “church-related institutions which have a substantial religious character,” including church-affiliated schools. Further, the exception is not limited to members of the clergy, but encompasses “all employees of a religious institution, whether ordained or not, whose primary functions serve its spiritual and pastoral mission.” The court concluded that the ministerial exception applied to the plaintiff, and barred consideration of her claims. In particular, it noted that the plaintiff: (1) led the students in prayer at the beginning and end of each day and before each meal; (2) was responsible for leading chapel up to four times a year; (3) regularly taught religion in her classes, including secular classes; (4) participated in weekly devotions with the staff at which they would read a devotional-type book and then take prayer requests and pray for each other; (5) led staff prayers; and (6) conducted tours for parents of student applicants, assuring them of the school’s Christian atmosphere. The court concluded: “The minister is the chief instrument by which the church seeks to fulfill its purpose …. One such purpose is to bring people to the church. The plaintiff fulfilled that function by teaching her preschoolers religion, leading them in prayers every day, and leading chapel services. She taught religion and spread the faith. We find the ministerial exception applies in this matter.”

What This Means For Churches:

This case is significant for the following reasons.

First, it illustrates the importance of accurately describing the basis for terminating an employee. As this case illustrates, there is a critical legal difference between dismissing an employee on account of pregnancy (even if out of wedlock) and dismissing an employee on account of adultery (of which pregnancy is merely evidence). The court acknowledged that dismissing a pregnant employee on account of adultery is permissible under Title VII, though dismissing an employee on account of pregnancy is not. It does not matter that pregnancy out of wedlock violates a church’s religious teachings and values. Title VII does not exempt churches from discrimination based on pregnancy. It does exempt churches from discrimination based on adultery. The takeaway point is the importance of correctly and adequately describing the basis for employee terminations and discipline. To avoid confusion, religious organizations that take an adverse employment action against an employee or applicant for employment as a result of the organization’s moral teachings should word their determination with references to relevant passages from scripture and church doctrine. This will make it more likely that a court will view the decision as a protected form of religious discrimination.

Second, a number of courts have ruled that Title VII’s exemption of religious organizations from the ban on religious discrimination in employment does not apply if a religious organization uses religion as a “pretext” to discriminate against a member of a protected class. This is a very important qualification. Religious organizations can discriminate in their employment decisions on the basis of religion, but they must be consistent. To illustrate, a church that dismisses only female employees on the basis of extramarital sexual relations could not justify this practice on the basis of the Title VII exemption.

Third, note that most churches are not subject to Title VII, which only applies to employers that have 15 or more employees and are engaged in interstate commerce. However, many states have their own versions of Title VII, and some churches will be covered under these laws. Fortunately, most of them (like Title VII) exempt religious employers from discrimination based on religion. Some exempt religious employers from all the discrimination prohibitions. Evangelical Lutheran Church, 134 Cal.Rptr.3d 15 (Cal. 2012).

Key point 8-09.1. Many federal employment and civil rights laws apply only to those employers having a minimum number of employees. In determining whether or not an employer has the minimum number of employees, both fulltime and part-time employees are counted. In addition, employees of unincorporated subsidiary ministries of a church are counted. The employees of incorporated subsidiary ministries may be counted if the church exercises sufficient control over the subsidiary.

Legal Developments

Liability for Retirement Fund Losses

Protect your retirement fund and its governing board from liability for losses.

Richard R. Hammar, Attorney, CPA

Bio

State: Minnesota
Categories: Denominations - Legal Liability, Retirement Plans

Church Law & Tax Report

Liability for Retirement Fund Losses

Protect your retirement fund and its governing board from liability for losses.

Richard R. Hammar, J.D., LL.M., CPA

A federal court in Minnesota ruled that a national denomination was not liable for losses suffered by beneficiaries of a denominational retirement plan because it did not exercise sufficient control over the fund to be liable for the actions of the fund’s managing board.

Four retired ministers (the “plaintiffs”) sued their denomination (the “national church”) to recover losses they incurred in a denominational pension fund. The pension fund is a defined contribution retirement plan under section 403(b) of the tax code. The plan is a “church plan” that is exempt from ERISA, absent an election to the contrary. Under the plan, defined contributions are made on behalf of participating members into their individual accounts. Plan participants have options for directing their plan accumulations. Before retirement, the accounts are considered “active,” and plan participants can direct their accumulations into funds invested in the equity or fixed income markets.

In December 2008, the plan sent a letter to the plaintiffs stating that their retirement accounts were subject to market risk and that they should expect their distributions to be decreased in 2010. In September 2009, the plan informed participants that, due to the market downturn, it was underfunded by 26 percent and that, effective January 1, 2010, monthly payments would decrease by 9 percent and would likely decrease by an additional 9 percent in both 2011 and 2012.

Plaintiffs sued the national church and the board of pensions that managed the retirement plan (the “defendants”), asserting that, under state law, the defendants were required to invest and manage retirement funds as a prudent investor, and that the defendants breached their fiduciary duties by failing to prudently invest and manage the retirement fund and failing to preserve the trust corpus which caused the fund to become significantly underfunded and reduce plaintiffs’ monthly payments.

fiduciary duties

The court concluded that the national church was not a fiduciary with respect to the retirement plan, and so the plaintiffs’ breach of fiduciary claim against the national church had to be dismissed. The court noted that the plan’s managing board, and not the national church, was the plan fiduciary in charge of administering and managing the plan. It pointed to language in the national church’s governing documents making the plan’s managing board, rather than the national church, responsible for the plan’s investment and administration.

Plaintiffs argued that the national church was a fiduciary with respect to its duty to elect members of the plan’s governing board, and that this imposed on it a limited duty to monitor the board’s activities. It observed that “a person with discretionary authority to appoint, maintain and remove plan fiduciaries is himself deemed a fiduciary with respect to the exercise of that authority. Implicit in the fiduciary duties attaching to persons empowered to appoint and remove plan fiduciaries is the duty to monitor appointees. The scope of the duty to monitor appointees is relatively narrow.” The court stressed that “the duty to monitor is limited and does not include a duty “to review all business decisions of plan administrators” because “that standard would defeat the purpose of having trustees appointed to run a benefits plan in the first place.” The court concluded that the plaintiffs’ lawsuit did not allege that the national church violated any duty to monitor, and therefore it failed to adequately allege that the national church violated a fiduciary duty owed to the plaintiffs.

“church plan” status

The court rejected the plaintiffs’ assertion that the plan’s status as a church plan somehow made the national church liable for the actions of the plan’s managing board. It acknowledged that a church plan must be “established and maintained … by a church,” and that a plan maintained by a third party, such as a pension board, is “established and maintained … by a church” if the third party “is controlled by or associated with a church or a convention or association of churches.” Church plan status is awarded not only to plans controlled by a church, but also to plans associated with a church. An organization is “associated with” a church “if it shares common religious bonds and convictions with that church.”

The court concluded that “the plan’s status as a church plan did not require that the [national church] exercise control over the board or plan, let alone control over the board’s actions at issue in this lawsuit, to the extent that [national church] is liable for the board’s actions. Here, the [plaintiffs] do not allege that [the national church] controls the board with regard to the decisions at issue in this litigation.”

alter ego liability

As an alternative means of holding the national church liable, the plaintiffs alleged that the plan and its governing board were an “alter ego” of the national church and that “injustice and fundamental unfairness would result if the national church was not held accountable” for the board’s misconduct.

The court noted that “there is a presumption of separateness between a parent and subsidiary corporation,” and that “a court may pierce the corporate veil to hold a party liable for the acts of a corporate entity if the entity is used for a fraudulent purpose or the party is the alter ego of the entity. When using the alter ego theory to pierce the corporate veil, courts look to the reality and not form, with how the corporation operated and the individual defendant’s relationship to that operation.”

Under Minnesota law, piercing the corporate veil “requires (1) analyzing the reality of how the corporation functioned and the defendant’s relationship to that operation, and (2) finding injustice or fundamental unfairness.”

The court listed the following factors that are significant in applying the first prong: “whether there is insufficient capitalization for purposes of corporate undertaking, a failure to observe corporate formalities, nonpayment of dividends, insolvency of debtor corporation at time of transaction in question, siphoning of funds by dominant shareholder, nonfunctioning of other officers and directors, absence of corporate records, and existence of the corporation as merely a facade for individual dealings.”

The plaintiffs did not allege any improper transfer of assets between the national church and the plan or its board. Nor did they allege any other type of misuse of the corporate form or plan to harm the plaintiffs. The plaintiffs alleged that the plan is undercapitalized, but “there is no allegation that the national church played any role in that situation. Beyond the conclusory allegation of undercapitalization, there are no factual allegations to support the first prong of piercing the corporate veil.”

The court acknowledged that the national church and the retirement plan “share a close relationship.” However, it concluded:

The national church’s Constitution shows the separation of the corporate structures governing the national church and the board. For example, the Constitution provides that ‘separate incorporation shall be maintained’ for the board. It enumerates the board’s responsibilities in operating and managing benefit plans, which include autonomy and independence. The documents referenced [by the plaintiff] demonstrate that the national church and the board are separate corporate entities, and the plaintiffs provide no factual allegation that these corporate formalities have been disregarded.

The court also concluded that the plaintiffs failed to establish the second prong. It noted that the plaintiffs’ lawsuit alleged that the plan’s board was “an alter ego or instrumentality of the [national church], and injustice and fundamental unfairness would result if the [the national church] is not held accountable for the liabilities resulting from shortfalls in the retirement plan due to undercapitalization or the board of pensions’ lack of resources to cover its liabilities.” But the court stressed that this “barebones allegation that injustice or fundamental unfairness will result” if the national church is not liable was insufficient. It noted that there was no allegation in the plaintiffs’ lawsuit that the national church played any role in any underfunding or that the plan was underfunded when the national church created it. As a result, the plaintiffs “failed to allege facts to support their legal conclusion of injustice or unfairness.”

The court concluded that “although corporations are related, there can be no piercing of the veil without a showing of improper conduct” by the parent corporation.

breach of contract

The plaintiffs’ final argument was that the retirement plan and its governing board were guilty of a breach of contract. The court agreed that the retirement plan constituted a contract with the plaintiffs and other beneficiaries, and it concluded that the plaintiffs’ allegations of a breach of the contract were sufficient to avoid a dismissal of this theory of liability: “The [plaintiffs] claim that the board breached the terms of the plan because, although the plan promised that plaintiffs’ annuity benefits were guaranteed for life and that all increases to those benefits would be permanent, the board implemented an across-the-board 9% decrease in the participants’ monthly annuity benefits.”

The board insisted that its actions were a response to the adverse economic conditions caused by the recession, and were necessary to preserve and maintain the plan. The court concluded that it “did not have the information necessary to conclude whether, in fact, a cut in payments was required to preserve the fund, the amount of any required cut, or whether the fund’s underfunding was, itself, a breach of fiduciary duty. The question of whether the board’s actions were required by—or a breach of—its fiduciary duty is one that cannot be resolved at the motion to dismiss stage.”

What This Means For Churches:

Many beneficiaries of denominational retirement plans have suffered substantial losses during the “great recession.” But, as this case illustrates, those losses are not necessarily attributable to the denomination itself if the retirement plan is a separate corporation with a separate board, and the denomination exercises little, if any, supervision or control over the management decisions of the plan. Further, retirement funds, and their governing boards, are not necessarily liable for beneficiaries’ losses if the individual accounts are self-directed, and no promises are made that are later broken. There are several ways for retirement funds to reduce their risk of liability, including allowing beneficiaries to direct their own investments, by providing educational and training resources to beneficiaries, and by repeatedly stressing that all investments involve risk. 2011 WL 2970962 (D. Minn. 2011).

This Recent Development first appeared in Church Law and Tax Report, July/August 2012.

Legal Developments

Can a Denomination Be Held Responsible for a Pastor’s Sexual Misconduct?

The answer hinges on whether the pastor is considered an employee of the denomination.

Richard R. Hammar, Attorney, CPA

Bio

State: Michigan
Categories: Denominations - Legal Liability, Sexual Misconduct by Clergy, Lay Employees, and Volunteers

Church Law & Tax Report

Can a Denomination Be Held Responsible for a Pastor’s Sexual Misconduct?

The answer hinges on whether the pastor is considered an employee of the denomination.

Richard R. Hammar, J.D., LL.M., CPA

Key point 10-02.1. Employers may be liable on the basis of respondeat superior only for the acts of employees.

Key point 10-18.2. Most courts have refused to hold denominational agencies liable for the acts of affiliated ministers and churches, either because of First Amendment considerations or because the relationship between the denominational agency and affiliated church or minister is too remote to support liability.

A Texas court ruled that a national church was not responsible on the basis of respondeat superior or negligence for a pastor’s sexual misconduct; and, that use of the denominational name in the local church’s name did not impose on the national church any duty to investigate pastors who served its affiliated churches. A woman (the “plaintiff”) claimed that in 1990 several woman in her church complained to the denomination (the “national church”) with which the church was affiliated about their pastor’s sexually inappropriate behavior. The plaintiff claimed that no action was taken. Several years later, the plaintiff claimed that the pastor “engaged in a pattern of egregious physical and sexual abuse against” her when she sought “spiritual counseling” from him. These acts occurred both at the church and in the parsonage “under the guise of pastoral counseling.” The plaintiff claimed that she wrote a letter to the national church “specifically outlining this pattern of abuse” and that the national church appointed two representatives to investigate but took no action.

The plaintiff sued the national church on the basis of the “respondeat superior” doctrine, as well as negligence. The trial court dismissed the claims against the national church, and the plaintiff appealed.

respondeat superior

The legal principle of respondeat superior (the “superior responds”) makes employers liable for the negligent acts of their employees committed in the course of their employment. The plaintiff claimed that the national church was responsible for the pastor’s conduct on this basis since he was an employee and his acts were in the course of his employment. She cited the following facts supporting her claim that the pastor was an employee of the national church:

the official manual of the national church empowers it to select pastors for affiliated churches;
the manual states that bishops appointed by the national church have “general supervision over all departments and churches in their jurisdiction”;
the national church may suspend or remove a pastor for any of the following grounds: (1) failure to abide by the national church’s rules and regulations; (2) committing misfeasance, malfeasance, or nonfeasance in office; (3) convicted of a felony or misdemeanor involving moral turpitude; (4) espousing doctrines repugnant to the national church’s articles of faith; (5) misappropriation or misuse of funds; or (6) conduct unbecoming to a minister.
the national church allowed the pastor to administer pastoral counseling to members of the church;
the pastor attended seminars and conferences sponsored by the national church;
the pastor used the national church’s reputation and property in the commission of his acts.

The court concluded that an employer must have the right to control not only what workers do, but how they perform their tasks, in order for them to be deemed employees. The court concluded that the national church “did not have such a right of control over the details of [the pastor’s] work that it could be liable as an employer for purposes of respondeat superior.”

negligence

The plaintiff asserted that the national church had been informed in 1990 of accusations of sexual misconduct by the pastor, and that these accusations imposed on it a duty to adequately supervise him and protect other women from harm, including informing the congregation of the accusations. Its failure to do so amounted to negligence.

The court concluded that the national church’s knowledge of the accusations of sexual misconduct in 1990 did not make it responsible for the pastor molestation of the plaintiff many years later. It noted that even if the national church had informed the congregation in 1990 of the accusations, this would not have avoided the pastor’s molestation of the plaintiff. It noted that several members of the congregation were aware of the accusations in 1990, and took steps to remove the pastor from office. Further, the 1990 incidents were far less offensive than the acts perpetrated against the plaintiff, and therefore knowledge of the 1990 incidents did not suggest that the pastor would one day commit far more serious infractions.

negligent hiring, supervision, retention, and training

The plaintiff claimed that the national church was responsible for the pastor’s acts on the basis of its negligence in hiring, supervising, retaining, and training him. In rejecting this basis of liability, the court observed:

Negligence in hiring or retention requires that an employer’s failure to investigate, screen, or supervise its employees proximately caused the injuries the plaintiff alleges. An employer is not negligent when there is nothing in the employee’s background that would cause a reasonable employer not to hire or retain the employee. To establish a claim for negligent training, a plaintiff must prove that a reasonably prudent employer would have provided training beyond that which was given and that failure to do so caused his injuries. To establish a claim for negligent supervision, a plaintiff must show that an employer’s failure to supervise its employees caused his injuries. Thus, to be liable for negligent hiring, supervision, retention, or training, a defendant must have been involved in hiring the actor or retaining that actor in its employ.

Because there is no evidence that the national church participated in the hiring or retention of the pastor … or that it retained the requisite control over his day-to-day activities as pastor, summary judgment was proper as to the plaintiff’s negligent hiring, supervision, retention, and training claims …. There is no evidence indicating that … additional training would have prevented the plaintiff’s injuries.

Finally, to the extent the plaintiff argues that the national church should have investigated the pastor’s background before allowing the church to use [the national church’s name] in its name … there is no evidence that the fellowshipping or affiliation with the national church is what drew the plaintiff to attend the church.

What This Means for Churches:

This case is important for the following reasons. First, it illustrates that regional and national churches ordinarily will not be liable for the acts of ministers on the basis of respondeat superior, since an employment relationship does not exist. While there often are some examples of interrelationship between denominational agencies and clergy, these interrelationships generally do not create sufficient control over how clergy perform their tasks to create an employment relationship.

Second, the court concluded that knowledge of inappropriate behavior many years ago will not necessarily impose a duty on a church to take measures to prevent far more serious offenses today.

Third, the court concluded that a denominational agency that does not “hire” clergy or exercise control over their “day-to-day activities” is not responsible on the basis of negligent hiring, supervision, retention, or training for their wrongful acts.

Fourth, the court concluded that the use of a denomination’s name in a local church’s name does not, in itself, impose a duty on the denomination to investigate pastors’ backgrounds before allowing them to be employed in a pastoral capacity in an affiliated church. 2011 WL 1833095 (Tex. App. 2011).

This Recent Development first appeared in Church Law and Tax Report, May/June 2012.

Legal Developments

Vicarious Liability

Can a school be sued for the molestation of a student?

Richard R. Hammar, Attorney, CPA

Bio

State: Louisiana
Categories: Denominations - Legal Liability

Church Law & Tax Report

Vicarious Liability

Can a school be sued for the molestation of a student?

Richard R. Hammar, J.D., LL.M., CPA

A Louisiana court ruled that a school could be sued on the basis of negligent supervision, but not negligent hiring, for a janitor’s sexual molestation of an 8-year-old student. An 8-year-old girl (the “victim”) arrived at school at 7:15 a.m. one day. Although school did not begin until 8 a.m., the victim participated in the breakfast program, which began 30 minutes before the start of school. According to the victim’s account of the events that morning, when she walked up to the school she was approached by the school janitor, who informed her that one of her teachers wanted to see her and proceeded to walk her upstairs to a classroom. Once in the classroom the janitor molested her and warned her not to tell anyone what had happened. Two days later, the victim informed her family, which led to the janitor’s arrest and prosecution for child abuse. The victim’s mother thereafter sued the school for negligent supervision, vicarious liability, and negligent hiring. A trial court dismissed the lawsuit, and the mother appealed.

negligent supervision

The appeals court noted that the school was unlocked and students were allowed into the cafeteria prior to the start of the breakfast program. There was a supervising teacher and cafeteria worker on site for the breakfast program from 7 a.m. until the start of the school day. The school had a security plan in place that included the presence of a security guard to help ensure the safety of the children. However, the school’s principal testified that she could not recall the exact time the security plan called for the security guard to report to duty, making it impossible for her to determine if the security plan was properly implemented on the day the victim was molested.

The school claimed that the victim was dropped off before the official start of the breakfast program, and therefore it had no duty to supervise or protect her from the conduct of its employees. The court disagreed:

The Court concluded that an employer’s risk of liability for an employee’s acts “increases with the amount of authority and freedom of action granted to the employee in performing his assigned tasks.”

[The principal’s] testimony established that the victim was dropped off at approximately the same time every morning. Each time the victim was dropped [the principal] observed that the school was always open and there was staff present. A reasonable person would conclude that once the students are allowed to enter the school building, they are under the school’s care and the duty to supervise is assumed.

vicarious liability

In general, an employer is vicariously liable for the acts of its employees committed within the scope of their employment. The school insisted that it was not vicariously liable for the janitor’s acts since they were not committed within the course and scope of his work. The court concluded that the vicarious liability claim against the school could proceed. It concluded:

In considering whether the tortious act was reasonably incidental to the performance of [the janitor’s] duties, we must look at the facts and circumstances specific to this case. [The school principal] testified that the janitor possessed keys to the premises and was allowed free access to the school grounds and buildings. His status as janitor also permitted him access to the young children attending the school. Given his prominent presence on the school’s campus and the fact that he was an adult, it is natural that an eight-year-old child would view him as an authority figure, which explains why the victim did not question his directive.

The court noted that “the scope of risks attributable to an employer increases with the amount of authority and freedom of action granted to the employee in performing his assigned tasks.” In this case, “it is clear that it was the janitor’s position and duties as a school employee that allowed him unrestricted access to the victim and the empty classroom where she was taken.”

negligent hiring and retention

The court rejected the victim’s claim that the school was negligent in hiring the janitor. It noted that as a condition of employment the school performed a background check on the janitor and found that he did not have a record of criminal activity.

The victim claimed that the school was aware that the janitor had molested another student in the past, and therefore was negligent in hiring or retaining him. But the court dismissed this claim on the ground that the victim presented no corroborating evidence that school officials were aware of any prior incident.

What This Means For Churches:

This case is instructive for two reasons. First, it demonstrates that schools, and churches, may be liable for injuries to minors that occur on their premises even before any scheduled activity. As the court noted, “a reasonable person would conclude that once the students are allowed to enter the school building, they are under the school’s care and the duty to supervise is assumed.”

Second, the court concluded that an employer’s risk of liability for an employee’s acts “increases with the amount of authority and freedom of action granted to the employee in performing his assigned tasks.” The janitor in this case had keys to the school building, and had unrestricted access to the entire premises. As a result, the court concluded that the school was vicariously liable for his acts. Booth v. Orleans Parish School Board, 49 So.3d 919 (La. App. 2011).

This Recent Development first appeared in Church Law and Tax Report, March/April 2012.

Legal Developments

Legal Liability When a Pension Plan Fails

Denominations could be responsible for failure to provide for plan members.

Richard R. Hammar, Attorney, CPA

Bio

State: Minnesota
Categories: Denominations - Legal Liability, Retirement Plans

Church Law & Tax Report

Legal Liability When a Pension Plan Fails

Denominations could be responsible for failure to provide for plan members.

Richard R. Hammar, J.D., LL.M., CPA

Key point 10-18.3. There are several legal defenses available to a denominational agency that is sued as a result of the acts or obligations of affiliated clergy and churches. These include a lack of temporal control over clergy and churches; a lack of official notice of a minister’s prior wrongdoing in accordance with the denomination’s governing documents; lack of an agency relationship; the prohibition by the First Amendment of any attempt by the civil courts to impose liability on religious organizations in a way that would threaten or alter their polity; and elimination or modification of the principle of joint and several liability.

Key point. “Church plans” are exempt from ERISA coverage.

A federal court in Minnesota dismissed a lawsuit brought by several participants in a denominational pension plan citing ERISA violations and state law claims for breach of trust, breach of contract, breach of fiduciary duty, and consumer fraud. In 1939 a pension plan was established for the benefit of employees and retirees of a denominational publishing house (the “publisher”) that provided books and other materials to affiliated churches. The plan was terminated in 2010 at which time there were approximately 500 participants, of which 175 had already retired. A number of participants (the “plaintiffs”), on behalf of the entire plan, sued the publisher as well as the parent denomination. The plaintiffs claimed that as recently as 1999 the publisher was debt-free and had $18 million in reserves, and that it experienced financial difficulties beginning in 2002 that resulted in a severe drop in reserves and assets. The plaintiffs claimed that, despite these financial setbacks, the publisher continued to promote its retirement plan and repeatedly distributed written statements to employees promising benefits—despite knowing that the plan was severely underfunded. The plaintiffs sued the publishing house and parent denomination on several grounds under both ERISA and state law. The plaintiffs asserted that the impact on current employees and retirees has been catastrophic. Of the 500 participants, 175 have already retired, and of those, some are too old or sick to reenter the work force. All of them have lost most, and many all, of their expected retirement income.

ERISA

The court concluded that the retirement plan was a “church plan” that was exempt from ERISA, and dismissed the plaintiffs’ ERISA claims. ERISA defines “church plans” as “a plan established and maintained … for its employees (or their beneficiaries) by a church or by a convention or association of churches which is exempt from tax” under section 501(c)(3) of the tax code. The definition of “church plan” further provides that an employee of a church or a convention or association of churches includes “an employee of an organization, whether a civil law corporation or otherwise, which is exempt from tax under [section 501(c)(3) of the tax code] and which is controlled by or associated with a church or a convention or association of churches.” An organization is “associated” with a church or a convention or association of churches “if it shares common religious bonds and convictions with that church or convention or association of churches.”

The court concluded: “The court has thoroughly reviewed the applicable law and the arguments of counsel, and finds no support for plaintiffs’ position that a single employer benefit plan, established and maintained by an organization controlled by or associated with a church, is not a church plan as defined by ERISA. Rather, the court finds that the statutory language defining ‘church plan,’ as well as the applicable agency determinations and court decisions support a finding that the plan is a church plan.”

state law claims

The plaintiffs asserted that the parent denomination (the “national church”) was liable for the plaintiffs’ losses since the publisher was the “alter ego” of the national church.

Generally, one corporation cannot be liable for the acts and obligations of another corporation, even though there is some connection between the two. This is due to the fact that corporate status erects a “firewall” that prevents one corporation from being liable for the acts of the other. But under the so-called “alter ego” doctrine, one corporation can be liable for the acts of another if its control over the other is so dominant that the other has no independent existence apart from the dominant corporation and is nothing more than an alter ego, or extension, of it. The court observed:

Factors considered significant in the determination [of an alter ego relationship] include: insufficient capitalization for purposes of corporate undertaking, failure to observe corporate formalities … insolvency of debtor corporation at time of transaction in question, siphoning of funds by dominant shareholder, nonfunctioning of other officers and directors, absence of corporate records, and existence of corporation as merely facade for individual dealings.

In support of the alter ego theory, the plaintiffs cited the following evidence:

the publisher’s original board consisted of three pastors ordained by the national church;
the publisher’s articles of incorporation provide that the publisher is organized and operates exclusively for religious purposes and to assist the national church in carrying out its purposes;
delegates of the national church’s convention elect the publisher’s board;
the publisher’s articles of incorporation specify that in the event of its dissolution, any surplus property goes to the national church;
the national church’s presiding bishop participates in nominating the publisher’s CEO;
the publisher’s CEO has made statements to the effect that “we are the church, your partners in ministry.”

The court declined the national church’s motion to dismiss the plaintiffs’ alter ego claim. It observed:

The alter ego doctrine is designed to impose liability on the true defendant, rather than a corporate form. In doing so, the court is to analyze the “reality” of the corporate functions and to find injustice or fundamental unfairness. With this in mind, the court finds that plaintiffs have asserted sufficient factual allegations to support an alter ego theory. Plaintiffs’ theory is based on allegations that [the national church] is entwined in a close relationship with [the publisher] as evinced by its tight control of the publisher, the publisher’s misleading statements, which were known to the national church, and by the transfer of a revenue source worth $10 million [a denominational magazine] all while the publisher was underfunding its pension plan apparently due to financial distress. Plaintiffs have also alleged facts that raise questions as to the publisher’s solvency at the time of the termination and as to corporate siphoning ….

There are also allegations as to misconduct. Plaintiffs allege they were misled in two ways about the plan. First, they were misled into believing they would receive pensions. Plaintiffs were repeatedly given written statements that they would receive pension benefits when they retired. Second, the publisher’s CEO frequently described the publisher and the national church as partners, which implied that they would stand together, look after each other and their employees.

What This Means For Churches:

This case represents one of the few cases to recognize the viability of an alter ego claim against a national church organization on the basis of the acts and obligations of an affiliate. Most courts have concluded that the alter ego theory’s strict requirements generally are not met in cases involving national churches and their affiliated churches and agencies. One authority lists the following factors to consider in applying the alter ego doctrine:

The factors include whether: (1) the parent and subsidiary have common stock ownership; (2) the parent and subsidiary have common directors and officers; (3) the parent and subsidiary have common business departments; (4) the parent and subsidiary file consolidated financial statements and tax returns; (5) the parent finances the subsidiary; (6) the parent caused the incorporation of the subsidiary; (7) the subsidiary operates with grossly inadequate capital; (8) the parent pays the salaries and other expenses of the subsidiary; (9) the subsidiary receives no business except that given to it by the parent; (10) the parent uses the subsidiary’s property as its own; (11) the daily operations of the two corporations are not kept separate; and (12) the subsidiary does not observe the basic corporate formalities, such as keeping separate books and records and holding shareholder and board meetings. Fletcher Cyc. Corp. § 43.

Obviously, few if any churches or agencies would be deemed an “alter ego” of a national church under this analysis.

It must be stressed that the court did not find the national church liable on the basis of the alter ego theory for the publisher’s obligations. Rather, it rejected the national church’s request that the alter ego claim be dismissed. The court’s decision will allow the plaintiffs to pursue their alter ego claim in the trial court. Thorkelson v. Publishing House, 764 F.Supp.2d 1119 (D. Minn. 2011).

This Recent Development first appeared in Church Law and Tax Report, March/April 2012.

Legal Developments

Termination of Free Counseling for an Abuse Victim

Consequences of stopping counseling payments.

Richard R. Hammar, Attorney, CPA

Bio

State: Pennsylvania
Categories: Denominations - Legal Liability

Church Law & Tax Report

Termination of Free Counseling for an Abuse Victim

Consequences of stopping counseling payments.

Richard R. Hammar, J.D., LL.M., CPA

Key point. Churches that voluntarily agree to pay counseling fees to victims of sexual misconduct may be able to discontinue these payments without liability if the counseling has not placed the counselee in a worse position.

A Pennsylvania court ruled that a Catholic diocese that agreed to pay counseling fees for a victim of childhood sexual abuse was not responsible for the victim’s suicide that occurred shortly after the diocese decided to stop paying for the counseling. For three years a student (the decedent) at a church-operated parochial school was a victim of sexual abuse by a priest. Thereafter, the decedent graduated from a state university with honors, and became employed in a professional capacity. In 2008, allegedly as a result of the effects of the sexual abuse, the decedent attempted to take his own life. Following this incident, the local diocese began paying for the decedent’s counseling expenses. A year later, the decedent again unsuccessfully attempted suicide. The diocese continued to provide payment for counseling services. In 2010, the diocese indicated that it would not financially support any further services or treatment, and agreed to issue a final payment for $75,000 regardless of decedent’s need for further treatment. A psychotherapist advised the diocese that the decedent needed continued treatment because of suicidal behavior. The decedent’s family claimed that the diocese knew or should have known that their decision to discontinue further payment for psychiatric treatment would likely cause severe emotional distress to decedent. The family further claimed that decision to terminate further support resulted in the decedent taking his life.

The decedent’s family filed a wrongful death complaint against the diocese. A trial court dismissed all claims against the diocese. The family appealed. A state appeals court affirmed the trial court’s dismissal of the family’s claims. The court quoted, in support of its decision, the following excerpt from the Restatement (Second) of Torts (a respected legal treatise that has been adopted by many states):

Termination of Services. The fact that the actor gratuitously starts in to aid another does not necessarily require him to continue his services. He is not required to continue them indefinitely, or even until he has done everything in his power to aid and protect the other. The actor may normally abandon his efforts at any time unless, by giving the aid, he has put the other in a worse position than he was in before the actor attempted to aid him. His motives in discontinuing the services are immaterial. It is not necessary for him to justify his failure to continue the services by proving a privilege to do so, based upon his private concerns which would suffer from the continuance of the service. He may without liability discontinue the services through mere caprice, or because of personal dislike or enmity toward the other.

Where, however, the actor’s assistance has put the other in a worse position than he was in before, either because the actual danger of harm to the other has been increased by the partial performance, or because the other, in reliance upon the undertaking, has been induced to forego other opportunities of obtaining assistance, the actor is not free to discontinue his services where a reasonable man would not do so. He will then be required to exercise reasonable care to terminate his services in such a manner that there is no unreasonable risk of harm to the other, or to continue them until they can be so terminated. Section 323, comment “c”.

The court concluded that the diocese had not placed the decedent in a worse position by offering counseling services, and so the above-quoted exception did not apply. It noted that the decedent twice attempted to take his life prior to the third, successful, attempt. The court concluded: “Thus [the family] is not in a position to allege that the diocese, by notifying the decedent that it would be discontinuing payments for further treatment, can be viewed as putting him in a worse position than he was in before the diocese began paying for treatment …. The decedent was suicidal before the diocese aided him; he was suicidal while the diocese aided him; and unfortunately, he was suicidal after being informed that aid was being terminated. As the diocese had not put the decedent in a worse position than before services began, the diocese was free to discontinue services without liability.”

What This Means For Churches:

Some churches and denominational agencies have voluntarily agreed to pay counseling fees for persons who were sexually abused by a minister, lay employee, or volunteer. Over time, the question inevitably arises as to the duration of this obligation—a question that often is not contemplated or addressed when the commitment is made. This case suggests that a commitment to pay counseling fees, gratuitously made, may be terminated so long as the counseling has not placed the counselee in a “worse position.” But as this case illustrates, this may be difficult to prove. Because of the seriousness and complexity of this issue, and the fact that the Restatement is not recognized in all states, any commitment to pay counseling fees should not be terminated without the advice of legal counsel. Unglo v. Zubik, 29 A.3d 810 (Pa. Super. 2011).

This Recent Development first appeared in Church Law and Tax Report, March/April 2012.

Legal Developments

Ascending Liability Claims

National churches will not necessarily be held liable for the acts of local affiliates.

Richard R. Hammar, Attorney, CPA

Bio

State: California
Categories: Denominations - Legal Liability

Church Law & Tax Report

Ascending Liability Claims

National churches will not necessarily be held liable for the acts of local affiliates.

Richard R. Hammar, J.D., LL.M., CPA

A California court ruled that the national headquarters of Little League Baseball was not legally responsible for the sexual molestation of a 10-year-old boy by an adult volunteer worker. Little League Baseball is a nonprofit organization founded in 1939 and granted a federal charter in 1964. Little League Baseball’s purpose is “to promote, develop, supervise, and voluntarily assist in all lawful ways the interest of those who will participate in Little League Baseball.” Little League Baseball operates through local leagues, which apply for a charter from Little League Baseball.

Little League Baseball has promulgated a Little League Operating Manual (Operating Manual) under which each local league establishes its own administration, elects its own board of directors, and establishes guidelines that best suit the needs of the community in which it is established. The local league is responsible for the selection and supervision of coaches, managers, umpires, and other volunteers.

Little League Baseball has also promulgated Official Regulations and Playing Rules (Regulations). The Regulations address the manner in which the teams are to be established, the official playing rules, and the basic safety rules for players. The rules also dictate the playing divisions, age ranges for each division, registration and tryouts, the start and end dates of each season, and other rules relating to the game of baseball.

The Operating Manual and the Regulations do not give Little League Baseball any control over day-to-day operations of the local leagues.

Little League Baseball offers administrative support to local leagues at their request but does not require that local leagues consult with Little League Baseball. Little League Baseball offers local leagues the option of enrolling in the Little League blanket accident insurance plan, but does not require them to do so. Similarly, Little League Baseball recommends that local leagues operate as nonprofit corporations but does not require them to do so.

In 1994, Little League Baseball created a child abuse prevention program for distribution to local leagues. In 1996, Little League Baseball recommended a statement that was incorporated into Little League Baseball’s 1997 Operating Manual and distributed to every local league. This statement recommended that each local league create a formal written policy defining abuse and stating that it was unacceptable; that all managers, coaches, and other volunteers have a background check at the time of their applications; that procedures be set up to receive and act on allegations of abuse; that local law enforcement should be involved in implementing preventive measures and responding to allegations; that the application procedure should ask for criminal history, employment history, and references; and that a preseason meeting should be held annually for managers, coaches, and parents to explain prevention and detection mechanisms. However, until 2003, Little League Baseball did not implement a rule requiring background checks for all local volunteers.

In the 1990s, a registered high-risk sex offender (Randy) began serving as an umpire with a Little League affiliate in California. He eventually was promoted to the paid position of “umpire-in-chief.” At this time, the local affiliate did not require its officials or volunteers to fill out a written application or undergo a background check or other investigation, and no background check was ever conducted on Randy.

In 1996, Randy sexually molested a 10-year-old boy (the “victim”) on several occasions following evening baseball games. He was apprehended and sentenced to 84 years in prison.

In 2004 the victim sued Little League Baseball and its local affiliate for negligence in screening, retention, and supervision; negligence in failing to take reasonable protective measures; negligence in violation of a special relationship; breach of fiduciary duty; negligent and intentional infliction of emotional distress; and sexual assault, battery, and harassment. Little League Baseball (the national organization) was dismissed from the lawsuit, and the victims appealed this ruling.

the court’s ruling

The court began its ruling by describing the “convoluted syntax” of the victim’s legal claim: “The victim seeks to impose liability on the national organization that chartered the local organization for which the molester volunteered and later worked as an employee when the molester, through the local organization, met and befriended the child he later molested on occasions outside official Little League activities. Plaintiff’s theory of liability is that the national organization, Little League Baseball, was negligent in failing to require local leagues to investigate and screen local volunteers.”

The court concluded that “the nature and degree of the connection between the defendant’s acts and the events of which the plaintiff complains was, as a matter of public policy, too attenuated to support imposing liability on Little League Baseball.”

Application. This case is of direct relevance to any national denominational agency that has created a program for youth that can be utilized by local churches. The fact that the national church created the program does not necessarily make it liable for injuries that may occur at the local church level. Whether or not the national church is liable will depend on a number of factors. The court’s review of the nature of the relationship between Little League Baseball and its local affiliates provides an excellent example of the kinds of considerations that will be relevant in such a determination. These can guide national churches in the structuring of their youth programs and related manuals and resources to reduce the risk of ascending liability claims. B.R. v. Little League Baseball, Inc., 2009 WL 3049280 (Cal. App. 2009).

This Recent Development first appeared in Church Law & Tax Report, May/June 2011.

Legal Developments

Youth Pastor Jailed for Sexual Misconduct

Acts of sexual misconduct by clergy carry severe consequences.

Richard R. Hammar, Attorney, CPA

Bio

State: Washington
Categories: Denominations - Legal Liability, Sexual Misconduct by Clergy, Lay Employees, and Volunteers

Key Point 4-11.1. Clergy who engage in sexual contact with an adult or minor are subject to civil liability on the basis of several legal theories. They also are subject to criminal liability.

A Washington state court affirmed the conviction and 15-year prison sentence of a youth pastor who engaged in a sexual relationship with a member of the church youth group. Eric was the youth minister at a church and also taught at the church's school. On six occasions he had sexual intercourse with a member of his youth group (the "victim") who also attended the church school. Eric communicated with the victim via computer and the telephone. While communicating via the computer, he persuaded the victim to undress.

He then viewed her through a webcam. The victim later reported the incident to her mother, and she also disclosed their sexual relationship. The mother immediately reported the incidents to the police. The State charged Eric with six counts of first degree sexual misconduct, one count of communication with a minor for immoral purposes, and one count of sexual exploitation of a minor. A digital forensic specialist with the sheriff's office testified that he was able to recover chat logs and emails from Eric's and the victim's computers. The chat logs indicated that Eric was viewing webcam images. He explained a webcam picture is captured and then transmitted to the designated computer, but he could not recover the web camera pictures from Eric's computer because Web camera transmissions are viewed almost instantaneously rather than downloaded to the computer.

The court convicted Eric as charged, and the court imposed an exceptional sentence, running the 60-month sentence for the six counts of first degree sexual misconduct consecutive with the 120-month sentence for sexual exploitation of a minor. The court concluded "a standard range sentence is too lenient under the facts and circumstances of this case." The court also concluded that Eric was in a position of trust during the abuse of the victim. On appeal, Eric claimed that there was insufficient evidence to support his sexual exploitation of a minor conviction. He alleged that there was no evidence that he compelled the victim to "photograph" herself because a Webcam viewing is not considered a photograph. Under Washington law, a person is guilty of sexual exploitation of a minor if he or she: "aids, invites, employs, authorizes, or causes a minor to engage in sexually explicit conduct, knowing that such conduct will be photographed or part of a live performance." State law defines a "photograph" as a "print, negative, slide, digital image, motion picture or videotape. It includes anything tangible or intangible produced by photographing."

The court noted that "the legislature intended to draft the statute as broadly as possible to encompass any technology by which photographs containing child pornography could be reproduced and distributed." It concluded that interpreting the term "photograph" as broadly as possible to encompass any technology containing child pornography, "the sexually explicit acts viewed by Eric over his Webcam would be considered a photograph for purposes of [the statute]. A Webcam viewing would be characterized as an intangible digital image. Therefore, sufficient evidence exists to support the exploitation conviction."

Application. There are an array of legal consequences that often accompany acts of sexual misconduct by clergy. These include personal civil liability, liability for their employing church based on negligence or other grounds, and, as this case illustrates, possible criminal liability. The youth pastor in this case was sentenced to 15 years in prison for the relationship that he had with the victim. Five years of this sentence was for the acts of sexual intercourse. The remaining ten years was for "photographing" the victim with her Webcam. 2009 WL 473657 (Wash. App. 2009).

This Recent Development first appeared in Church Law & Tax Report, July/August 2009.

Legal Developments

Fiduciary Duty and Legal Liability

Breach of fiduciary duty is difficult to prove in court.

Richard R. Hammar, Attorney, CPA

Bio

State: New York
Categories: Denominations - Legal Liability, Fiduciary Duty

Church Law & Tax Report

Fiduciary Duty and Legal Liability

Breach of fiduciary duty is difficult to prove in court.

Richard R. Hammar, J.D., LL.M., CPA

Key Point. Under some circumstances ministers may owe a fiduciary duty to members of their congregation, and they may be liable for breaching this duty. Most cases of fiduciary duty involve sexual misconduct, but this basis of liability is not limited to such cases.

Key Point. Intentional infliction of emotional distress is a theory of liability that involves extreme and outrageous conduct. Plaintiffs rarely establish this theory of liability because of the difficulty of proving that a defendant’s actions were outrageous.

A New York court ruled that a pastor who allegedly disseminated information about a member’s criminal record to both staff and congregants did not breach any fiduciary duty or commit intentional infliction of emotional distress. A woman (the “plaintiff”) was an active member of her church. Because of her background in psychiatry, the church’s senior pastor sought advice from her on both church and personal matters, and it was during these private conversations that the plaintiff claims she shared information concerning her personal life, and her strategies for dealing with her own personal challenges. She characterized the pastor as her “friend, confidant, as well as [her] pastor and spiritual counselor.”

Plaintiff was charged with a property crime, and during the two-year course of her criminal proceeding, the pastor counseled her and attended court with her in his capacity as friend and pastor. The plaintiff was convicted of the crime. A few years later, she began alleging mismanagement of church funds by the pastor, and it was at this time that copies of her conviction record began circulating among the church staff and congregation in what the plaintiff claimed was a deliberate attempt to humiliate her and intimidate her from further criticism of the pastor’s management of the church. She sued the pastor, claiming that he was responsible for intentionally disseminating the information. The lawsuit claimed that the pastor’s disclosures amounted to a breach of a fiduciary duty, and caused her emotional distress.

Breach of fiduciary duty claim

The plaintiff claimed that the pastor breached a fiduciary duty that he owed to her by intentionally disseminating information about her criminal conviction that he learned in his role as her pastor and counselor. The court reached the following conclusions regarding this claim:

The clergy-penitent privilege statute does not create a fiduciary duty on the part of pastors toward their congregants.
Exposing clergy to personal liability as a result of the breach of a fiduciary duty “would likely require the interpretation of religious doctrine, thereby creating troubling constitutional implications under the First Amendment.”
The scope of a pastor’s fiduciary duty must be narrow in order to avoid constitutional problems under the First Amendment: “Allegations that give rise to only a general clergy-congregant relationship that includes aspects of counseling do not generally impose a fiduciary obligation upon a cleric.” Rather, the minister must assume “control and dominance” over the congregant who was “uniquely vulnerable and incapable of self-protection regarding the matter at issue.”

The court concluded that even if the pastor had disseminated information about her criminal conviction to the church staff and congregation, this fell far short of demonstrating that she “became uniquely vulnerable and incapable of self protection as a result of her relationship with him.” The court further noted that the criminal record allegedly disseminated by the pastor was a matter of public record. As a result, the court dismissed this theory of liability.

Emotional distress

The court noted that liability for the intentional infliction of emotional distress requires a demonstration that a defendant’s conduct was (1) extreme and outrageous, (2) intended to cause severe emotional distress, (3) resulted in severe emotional distress. As such, “success turns on whether the conduct complained of is extreme, amounting to more than mere threats or annoyances, and ultimately, so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized community.”

The court added that “the threshold of outrageousness is so difficult to attain, that of the intentional infliction of emotional distress claims considered by the [state’s highest court] every one has failed because the alleged conduct was not sufficiently outrageous.”

The court concluded that the pastor’s conduct in disseminating information concerning the plaintiff’s criminal conviction fell far short of this standard: “By far, the most problematic obstacle is the simple fact that the document distributed here, plaintiff’s criminal record, is a public document. The distribution of this record while perhaps embarrassing, on its own carries no constitutional right to privacy …. One’s criminal history is arguably not a private personal matter at all, since arrest and conviction records are matters of public record.”

The court also noted that the pastor’s involvement in the dissemination of the plaintiff’s criminal record had never been conclusively proven. Plaintiff testified that she did not know who had obtained her criminal record, or who had distributed the copies.

Application. This case illustrates the difficulty of proving breach of fiduciary duty, or intentional infliction of emotional distress, by a pastor. These theories of liability are even harder to establish when they involve the dissemination of matters of public record such as a criminal conviction. 863 N.Y.S.2d 874 (N.Y. Sup. 2008).

This Recent Development first appeared in Church Law & Tax Report, July/August 2009.

Legal Developments

Evidence of Subsequent Corrective Action

Evidence of remedial action taken after an event is generally not admissible in court.

Richard R. Hammar, Attorney, CPA

Bio

State: Connecticut
Categories: Denominations - Legal Liability, Sexual Misconduct by Clergy, Lay Employees, and Volunteers

Key Point Generally, evidence of corrective or remedial actions taken after an accident or injury are not admissible in evidence to prove negligence, since this would discourage persons from correcting dangerous conditions.

A Connecticut court ruled that a sexual abuse victim could not obtain copies of all sex abuse training materials used or distributed by a Catholic diocese in a lawsuit he brought against the diocese. A Catholic diocese was sued by a person (the "plaintiff") who allegedly was sexually abused by a priest in 1978. The plaintiff requested copies of "any and all sexual abuse training materials" that were "distributed or utilized within the diocese." The plaintiff claimed that post-1978 materials were relevant since they would tend to show preventative actions that could have been taken in 1978 and before, and that they would "tend to show later corrective action and that at some point the diocese was assuming responsibility for discovering and preventing such wrongdoing."

Connecticut Rule of Evidence § 4-7(a) provides that "evidence of measures taken after an event, which if taken before the event would have made injury or damage less likely to result, is inadmissible to prove negligence or culpable conduct in connection with the event." The court explained that "the rule barring evidence of subsequent repairs in negligence actions … presupposes that to admit evidence of subsequent repairs to an identified hazardous condition as proof of negligence penalizes the defendant for taking remedial measures. This discourages [persons] from repairing hazards, thereby perpetuating the danger. This policy fosters the public good by allowing persons to repair hazards without providing proof of negligence."

The court concluded that in this case the rule "prohibits evidence which tends to show subsequent preventative actions that could have been taken in 1978 and before; or which tends to show later corrective action …. Later sexual abuse training materials do not appear to be reasonably calculated to lead to the discovery of admissible evidence."

Application. Victims of sexual misconduct often subpoena sexual abuse training materials in lawsuits brought against a church or other entity in which the misconduct occurred. This case suggests that churches may be able to object to such requests on the ground that they seek evidence of subsequent corrective action that is generally inadmissible in a negligence lawsuit. 2008 WL 4925980 (Conn. Super. 2008).

This Recent Development first appeared in Church Law & Tax Report, July/August 2009.

Legal Developments

Reporting Sexual Misconduct to Future Employers

Churches are not generally required to warn future employers of an individual’s sexual misconduct.

Richard R. Hammar, Attorney, CPA

Bio

State: Wisconsin
Categories: Denominations - Legal Liability, Sexual Misconduct by Clergy, Lay Employees, and Volunteers

Key Point 8-24. A reference letter is a letter that evaluates the qualifications and suitability of a person for a particular position. Churches, like other employers, often use reference letters to screen new employees and volunteers. Churches often are asked to provide reference letters on current or former workers. The law generally provides employers with important protections when responding to a reference letter request. However, liability may still arise in some cases, such as if the employer acts with malice in drafting a reference letter.

The Wisconsin Supreme Court unanimously ruled that a church does not have an affirmative duty to warn future employers that one of its ministers had molested several boys. Five adult males (the "plaintiffs") alleged that they were sexually abused by a priest from 1968 to 1973 when he was employed as a teacher by a parochial school in Kentucky.

The plaintiff's lawsuit described an ongoing pattern of sexual abuse of children by the priest over the years. The plaintiffs allege that prior to 1964, he had engaged in inappropriate sexual conduct while at a Catholic seminary; that between 1964 and 1966, he abused more than two dozen children while a teacher at a Wisconsin parochial school; that he subsequently admitted to sexually abusing up to ten more children at another Wisconsin parochial school; and that the pattern of sexual abuse continued while he was a teacher at the parochial school in Kentucky. The plaintiffs sued the Wisconsin diocese (the "Diocese"), claiming that it "knew or should have known of the priest's propensity for sexually abusing children and, despite this knowledge, did not refer him to the police or take any other action to prevent him from continuing his pattern of sexually abusing children." The lawsuit further alleged that the failure of the diocese to refer the priest to the police or to take "other action to prevent a continuation of his pattern of sexually abusing children" amounted to negligence, and that the diocese's negligent conduct was a substantial factor in causing the priest's sexual abuse of and resulting injuries to the plaintiffs. The plaintiffs specified that such negligence in failing to take other action specifically included a negligent failure to warn "unforeseeable third parties," including "other dioceses within the United States, the parochial school systems or the parents of unforeseeable victims" of the priest's propensity for sexual abuse.

The court noted that the plaintiffs' negligence claim "is premised on an alleged failure to warn unforeseeable third parties, including any potential future employers of the priest at dioceses and parochial school systems everywhere in the country, as well as parents of unforeseeable victims."

The Diocese insisted that the law does not "impose a duty on employers to seek out and disclose information to an employee's subsequent employers or the public at large concerning a former employee's history of misconduct or antisocial behavior," and that under the legal theory of negligent referral or duty to warn "unless an employer gives a favorable reference to a subsequent employer or third party about the former employee while withholding negative information, there is no breach of duty established by the employer's failure to seek out subsequent employers and alert them to prior negative history of the former employee."

The supreme court concluded:
The Diocese's mere knowledge of the priest's past sexual abuse, or a presumed knowledge of a continued sexual propensity for abuse, is not enough to establish negligence. Reasonable and ordinary care does not require the Diocese to notify all potential subsequent employers within dioceses and parochial school systems across the country, along with all parents of future unforeseeable victims. Requiring such notification under these circumstances would create a vast obligation dramatically exceeding any approach to failure to warn recognized either in this state or in other jurisdictions ….

More importantly, in this case, the specific victims were unforeseeable. Foreseeability of specific victims becomes relevant when an affirmative obligation is argued, such as the obligation to warn. Moreover, the Diocese did not assume a special role in regard to the injured parties ….

The plaintiffs in this case had virtually no relationship with the Diocese. There are significant gaps temporally and geographically, with the plaintiffs separated from the Diocese by several state lines and their abuse separated from the priest's employment with the Diocese by a number of years, and the complaint never indicated that their paths crossed at all prior to the plaintiffs filing this action. Thus, the relationship between the parties in this case is quite attenuated.

There is no state in which employers are recognized as being negligent for failing to seek out, find, and warn future employers of sexually dangerous former employees. Even those states that have recognized a negligent referral doctrine do not impose liability when a referral letter is sent by a past employer to a future employer of such an employee unless actual misrepresentations are made in such a letter. See Randi W., 929 P.2d at 584 [fully addressed in section 8-24 of Richard Hammar's Pastor, Church & Law (4th ed. 2008)].

Thus, we conclude that the plaintiffs' complaint fails to allege negligence sufficiently to survive a motion to dismiss. Although the plaintiffs allege that the Diocese knew that the priest had a propensity for sexual abuse, what is more pertinent is what the plaintiffs did not allege. They did not allege that the Diocese knew that he was in Kentucky, still teaching children, or working for the Archdiocese in Louisville. They did not allege any knowledge that the children at the [parochial school in Kentucky] were in any danger. They did not allege that the Archdiocese of Louisville asked the Diocese for a reference, that the Diocese made a reference recommending the priest, or that the Diocese had any communication whatsoever with the Archdiocese of Louisville regarding the priest.

The plaintiffs also fail to provide legal authority supporting their arguments. They argue that the duty of ordinary care in this case encompasses a specific obligation to warn all parochial schools and dioceses in this country, as well as future parents of unforeseeable victims, but have cited no cases in which the failure to warn third parties has been described in such sweeping terms ….

We decline to rule that under the general duty of ordinary care recognized in Wisconsin, an employer may be found negligent for failing to warn unforeseen third parties of a dangerous former employee. Such a ruling would extend an employer's obligation to warn indefinitely into the future to a sweeping category of persons, thereby requiring employers to warn nearly all potential future employers or victims, as the plaintiffs in this case argue. … A decision to the contrary would create precedent suggesting that employers have an obligation to search out and disclose to all potential subsequent employers, which could include in an employment context every school in the country or beyond, all matters concerning an ex-employee's history …. The primary public policy problem with recognizing the claim as presented by the plaintiffs is that there is no sensible stopping point to recognizing negligence claims for such an open-ended and ill-defined sweeping claim. Recognizing the plaintiffs' claim against the Diocese in this case could result in requiring all employers to warn all unforeseen potential future employers of any number of problems related to any number of past employees. It could further result in all parents who become aware that their child was sexually abused then facing potential liability for not warning every other parent who might also have children at risk of being in contact with the perpetrator.

Application. This case is significant because it addresses the fundamental question of a church's duty to affirmatively warn future employers and potential victims of a former employee's propensity to engage in sexual or other misconduct. The relevance of the case is augmented by the fact that (1) it was a ruling by the Wisconsin Supreme Court; (2) it was a unanimous ruling; and (3) it represents the most extended discussion of this issue in any case involving a religious organization.

Note that the court suggested that its ruling might not relieve churches from liability for providing positive, unqualified references on former employees who committed sexual or other misconduct, or for failing to warn other churches where it knows such former employees are working. But, there is no affirmative duty to track former employees in order to give notice to all future employers and potential victims of the risk they face. It should also be noted that churches may face civil liability on the basis of "interference with contract" for gratuitously warning future employers of a former employee's previous misconduct if a reference was not requested and results in the employee's dismissal. Hornback v. Archdiocese of Milwaukee, 752 N.W.2d 862 (Wis. 2008).

This Recent Development first appeared in Church Law & Tax Report, July/August 2009.

Legal Developments

YMCA Ordered to Pay “Future Mental Anguish Damages”

Organization held liable for negligent selection for a worker’s molestation of a camper.

Richard R. Hammar, Attorney, CPA

Bio

State: Texas
Categories: Denominations - Legal Liability, Sexual Misconduct by Clergy, Lay Employees, and Volunteers

Key Point 10-04. A church may be liable on the basis of negligent selection for a worker's molestation of a minor if the church was negligent in the selection of the worker. Negligence means a failure to exercise reasonable care, and so negligent selection refers to a failure to exercise reasonable care in the selection of the worker. Liability based on negligent selection may be imposed upon a church for the acts of employees and volunteers.

The Texas Supreme Court upheld a jury award of $500,000 for mental suffering in a case involving the sexual molestation of a minor by a counselor at a YMCA summer camp. A 9-year-old boy (the "victim") was sexually molested by his counselor while attending a YMCA summer camp. The counselor was arrested and later confessed to sexually inappropriate conduct with a number of the young campers, including the victim. He claimed that the abuse occurred while both he and victim were fully dressed. The victim did not reveal the incident to his parents, who learned about it as a result of the counselor's confession.

The victim's parents sued the YMCA for negligently hiring, retention, and supervising the perpetrator. The jury found that the abuse caused the child serious mental injury and awarded "future" mental anguish damages of $500,000. The state supreme court affirmed this verdict, rejecting the YMCA's claim that there was insufficient evidence of future mental anguish. The court acknowledged that the victim testified that he had placed the incident "in a vault" in his mind. An expert witness testified that the victim's reference to putting the incident "in a vault" meant that he was using denial as a temporary coping mechanism, which is a common response to childhood sexual abuse. Other expert witnesses testified to other short and long-term effects that sexual abuse has on child victims, including poor performance in school.

One expert witness testified that trauma the victim experienced would not simply disappear but would have to be processed in some manner when he was ready, which may not happen for many years. In many cases where the victim "in-capsulates" the incident in a vault, as the victim had done, there is an "enormous reaction" when that vault opens later in life. The evidence further showed that, while the victim appeared to be functioning well, "children who have been sexually abused are often not diagnosed with depression or anxiety until they are adults in their thirties, forties, and fifties."

The court concluded: "We have recognized the consensus among experts that child victims of sexual abuse frequently repress and suppress memories and emotions associated with the event until their adult years." Adams v. YMCA of San Antonio, 265 S.W.3d 915 (Tex. 2008).

This Recent Development first appeared in Church Law & Tax Report, July/August 2009.