Appeals Court Refused to Dismiss a Former Employee’s Wrongful Termination Lawsuit

The trial court failed to conduct a “fact-sensitive and claim specific” analysis to determine if the First Amendment bars the former employee’s claims against a Roman Catholic archdiocese.

Richard R. Hammar, Attorney, CPA

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State: Indiana
Categories: Discrimination, Employment Practices, First Amendment

Key point 8-12.01. 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 8-21.02. Many state civil rights laws prohibit employers with a specified number of employees from discriminating in any employment decision on the basis of the sexual orientation of an employee or applicant for employment. Such laws generally exempt religious organizations.

An Indiana court refused to dismiss a former employee’s wrongful termination lawsuit against a Roman Catholic archdiocese on the ground that the trial court had yet to undertake a “fact-sensitive and claim specific” analysis that must precede analysis of whether the First Amendment bars the plaintiff’s claims against the archdiocese.

Background

A high school (the “school”) located in Indianapolis is affiliated with the Roman Catholic Archdiocese of Indianapolis. In 2006, the school extended a teaching contract to a language and social studies teacher (the “plaintiff”).

Over the ensuing decade, the school renewed the plaintiff’s teaching contract annually. In 2017, the plaintiff married his same-sex partner, who is a teacher at a Jesuit preparatory school (the “preparatory school”). The school last renewed the plaintiff’s teaching contract on May 21, 2019, for the 2019–2020 academic year.

On May 24, 2019, the school’s president informed the plaintiff that the archbishop of the archdiocese would soon require the school to “adopt and enforce morals clause language used in teacher contracts at Archdiocesan schools” in order for the school to retain its status as a recognized Catholic institution. The archdiocese issued the same directive to both the school and the preparatory school. The morals clause language provides as follows:

The Archdiocese recognizes that many teachers who contribute positively to the mission of the Church in forming young people through our Catholic schools are not practicing Catholics. For faculty members of other faith traditions, there remains an expectation that, regardless of their personal religious affiliations and beliefs, they will become knowledgeable of Catholic Church teachings, will be credible witnesses of the Catholic faith and will be models of Christian values. Catholic schools are ministries of the Catholic Church, and faculty members are vital to sharing the mission of the Church. Teachers are expected to be role models and are expressly charged with leading their students toward Christian maturity and with teaching the word of God. As role models for students, the personal conduct of every teacher and staff member must convey and be supportive of the teachings of the Catholic Church.

Determining whether a faculty member is conducting him/herself in accordance with the teachings of the Catholic Church is an internal Church/School matter and is at the discretion of the pastor, administrator, and/or Archbishop.

In a letter dated June 20, 2019, the preparatory school declined to terminate the employment of the plaintiff’s spouse. On June 21, 2019, the Archbishop decreed that the preparatory school could no longer designate itself as “Catholic”; the archdiocese no longer recognized the preparatory school as a Catholic institution; and the preparatory school would be omitted from The Official Catholic Directory.

On June 23, 2019, the school terminated the plaintiff’s teaching contract. That same day, the school issued a letter to parents, teachers, and staff that outlined the situation.

The plaintiff: archdiocese interfered with his contractual and employment relationship

On July 10, 2019, the plaintiff filed a complaint alleging that the archdiocese intentionally interfered with his contractual relationship and with his employment relationship with the school.

In his complaint, the plaintiff alleged that: (1) he is a homosexual male, who has been in a same-sex marriage since 2017; (2) he was under a teaching contract at the school in the 2019–2020 calendar year; (3) the archdiocese issued a directive, wherein the school was required to adopt and enforce morals clause language used in teacher contracts at archdiocese-recognized schools, was required to discontinue its employment of any teacher in a public, same-sex marriage, and could forfeit being formally recognized as a Catholic school in the archdiocese by failing to comply with the directive; and (4) the school subsequently terminated the plaintiff’s employment.

On May 7, 2021, the trial court dismissed the plaintiff’s lawsuit on the ground that the First Amendment guarantee of religious freedom deprived it of jurisdiction to adjudicate his claims.

The plaintiff promptly appealed, claiming that the trial court erred in dismissing his case because “[his] claims do not implicate internal church governance, require the courts to resolve an ecclesiastical controversy, or otherwise excessively entangle the courts with religion.” The archdiocese countered that, in issuing the directive to the school, it “act[ed] in accordance with ecclesiastical directive[,]” deriving from canon law, which courts cannot review or question.

The appeals court began its opinion by noting:

[T]he First Amendment to the United States Constitution . . . requires civil courts to refrain from interfering in matters of church discipline, faith, practice, and religious law. Thus, civil courts are precluded from resolving disputes involving churches if “resolution of the disputes cannot be made without extensive inquiry . . . into religious law and polity. . . .” Serbian Eastern Orthodox Diocese v. Milivojevich, 426 U.S. 696 (1976). The basic law in Indiana is that courts will not interfere with the internal affairs of a private organization unless a personal liberty or property right is jeopardized. “Thus, the articles of incorporation and by-laws of a not-for-profit corporation are generally considered to be a contract between the corporation and its members and among the members themselves.”

We have held that “personnel decisions are protected from civil court interference where review by the civil courts would require the courts to interpret and apply religious doctrine or ecclesiastical law. Ecclesiastical matters include “a matter which concerns theological controversy, church discipline, ecclesiastical government, or the conformity of the members of the church to the standard of morals required of them.”

But the court noted that the First Amendment does not prohibit courts from opening their doors to religious organizations. Instead, “a court can apply neutral principles of law to churches without violating the First Amendment. The First Amendment only prohibits the court from determining underlying questions of religious doctrine and practice.”

The court concluded that the trial court erred in dismissing the plaintiff’s claim. It noted that under the “church autonomy doctrine” churches have a First Amendment right to autonomy “in making decisions regarding their own internal affairs including matters of faith, doctrine, and internal governance.” But the First Amendment “does not immunize every legal claim against a religious institution and its members. The analysis in each case is fact-sensitive and claim specific, requiring an assessment of every issue raised in terms of doctrinal and administrative intrusion and entanglement.”

The court concluded that in this case the parties had yet to undertake the requisite “fact-sensitive and claim specific” analysis that must precede analysis of whether the First Amendment bars the plaintiff’s claims against the archdiocese.

What this means for churches

The court concluded that while it was barred by the “church autonomy doctrine” from adjudicating matters pertaining to a church’s internal affairs including matters of faith, doctrine, and internal governance, such a result was not proper without a “fact-sensitive and claim specific analysis requiring an assessment of every issue raised in terms of doctrinal and administrative intrusion and entanglement.”

Since the trial court had neglected to perform such an analysis, its dismissal of the plaintiff’s claims had to be reversed. Note that the court’s decision was based on a technicality, and not the merits of the archdiocese’s legal defenses. The case was remanded back to the trial court for a “fact-sensitive and claim specific analysis requiring an assessment of every issue raised in terms of doctrinal and administrative intrusion and entanglement.” The results of such an analysis may well result in a dismissal of the plaintiff’s claims.

There is one additional aspect of this case that deserves consideration. The plaintiff brought the following two claims against the archdiocese:

intentional interference with a contract, and

intentional interference with an employment relationship

These bases of church liability were addressed in a 2021 case in Pennsylvania that was discussed in the Legal Development on Tracy v. O’Bell, 268 A.3d 405 (Pa. App. 2021).

Payne-Elliott v. Roman Catholic Archdiocese, 180 N.E.3d 311 (Ind. App. 2021)

Legal Developments

Ex-Employee’s Lawsuit Against Church Fails Under Church Autonomy Doctrine

Florida appeals court also rejects agency law claim based on the doctrine.

Richard R. Hammar, Attorney, CPA

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State: Florida
Categories: First Amendment

A Florida state appeals court ruled that it was barred by the “ecclesiastical abstention doctrine” from resolving a dismissed church employee’s lawsuit against her former church.

Background

A woman (the “plaintiff”) was hired as an office manager by a Catholic church.

Twelve years later, the church’s pastor and the plaintiff executed an employment agreement for the first time. The agreement, which purported to bind the church and local diocese, provided that the plaintiff would remain employed for four years, allowed termination only for cause, and required six months advance notice to avoid an automatic renewal.

Soon thereafter the local bishop appointed a new pastor for the church who promptly terminated the plaintiff’s employment without notice in violation of the employment agreement, allegedly due to a reduction in workforce.

Fired employee sues for breach of contract

Following her termination, the plaintiff sued the pastor, church, and diocese (the “church defendants”) for breach of her employment agreement. The lawsuit alleged that the former pastor had the exclusive authority to hire and fire anyone employed by the church, to enter into employment agreements with employees, and to operate and manage the church as he deemed appropriate.

The church defendants asked the court to dismiss the lawsuit on the basis of the “church autonomy doctrine” that generally bars the civil courts from resolving internal church disputes involving matters of “discipline, faith, internal organization, or ecclesiastical rule, custom or law.” Serbian Eastern Orthodox Diocese v. Milivojevich, 426 U.S. 696, 712-13 (1976).

The trial court dismissed the lawsuit, noting that the main dispute was “not whether an employment contract was breached, but whether or not [the former pastor] had the . . . authority within his capacity as pastor of [the church] to enter into an employment contract with [the plaintiff].”

“The trial court determined that resolving this issue would require it to delve into the duties of a pastor and church organization and it therefore lacked . . . jurisdiction to hear the case,” the appeals court stated.

The court can’t “wade into ecclesiastical polity”

The plaintiff appealed.

The state appeals court began its ruling by noting:

[W]e now address whether the trial court erred in dismissing [the plaintiff’s] complaint. In doing so, our inquiry is whether this dispute is one of discipline, faith, internal organization, or ecclesiastical rule, custom, or law. If so, secular courts lack the authority to resolve the dispute. . . .

The court continued:

At the heart of the dispute between [the plaintiff] and the Church Defendants is whether [the former pastor] had the authority . . . to obligate successor administrations of [the church] to retain his chosen employees. Simply put [the plaintiff] has requested that a secular court examine a hierarchical religious organization and determine who has the authority to speak and act on its behalf. Whether based on actual or apparent authority [the plaintiff’s] request would require a court to impermissibly wade into ecclesiastical polity, in violation of the First Amendment.

Take [the plaintiff’s] claim that [the former pastor] had actual authority to form [the plaintiff’s] employment agreement. That claim would require an assessment of the interrelationship between the Diocese and [the church] and who within the Catholic church has the power and authority to control the operation of the parishes. Making that assessment, as [the plaintiff] recognizes, would require a court probe into religious Canon Law to discern the respective legal significance and authority of a pastor, a parish, and the Diocese. The risk of constitutional violation posed by this inquiry is evident: incorrectly identifying or describing the authority of a pastor as well as the scope of ordinary acts of administration would undermine the right of a religious organization to choose a structure that best propagates its message. But what is more, the United States Supreme Court has warned that the First Amendment may be violated not only by judicial decisions, but by the very inquiry that results in a court’s findings and conclusions of law.

[The plaintiff’s] claims based on apparent authority do not fare any better. Indeed, resolving this dispute based on a claim of apparent authority would require examining the history and operation of the Parish, scrutinizing the governance patterns of the Diocese, and applying secular conceptions of agency to church governance. This exercise too would permit a court to seize control of the church’s polity to the extent a religious organization’s structure and governance failed to conform with secular expectations (emphasis added).

The court concluded:

Whether [the former pastor] had the actual or apparent authority to form the employment agreement and bind [the church] and the Diocese . . . is a quintessentially religious controversy—one that would require judicial inquiry into internal church matters—and constitutes a subject matter of which secular courts lack jurisdiction. . . .

Because the dispute in this case is one regarding ecclesiastical polity, a secular court’s only legitimate role is ensuring the dispute is committed to religious authorities. The ecclesiastical abstention doctrine bars consideration of [the plaintiff’s] claims, and the trial court appropriately dismissed her complaint (emphasis added).

What this means for churches

This case is important for the following reasons.

First, in explaining the church autonomy doctrine, the court noted that in cases involving disputes over polity and administration, the Supreme Court “has taken a more categorical approach, recognizing that secular courts may not interfere with matters of internal church governance or interpret a church’s written constitution or ecclesiastical law.”

Other Notable Cases

See this Recommended Reading page for several other court decisions on employment disputes.

As a result, any attempts by litigants to pursue legal claims against a church will fail for any claim that is based on an interpretation of a church’s governing documents, especially if the interpretation is contrary to the church’s understanding of its governing documents.

Second, the court rejected the plaintiff’s attempt to base church liability on actual or apparent authority. If the former pastor had actual or apparent authority to execute the employment contract with the plaintiff, then the plaintiff’s breach of contract claim against the church might be viable.

This is a significant ruling regarding actual or apparent authority, which is also known as agency law. Churches and denominational agencies are often sued on the basis of agency for the behavior of volunteers and lay employees, and denominational agencies are often sued for the liabilities of affiliated churches.

Consider two examples:

A church volunteer, while driving her vehicle on church business, is involved in a traffic accident with another vehicle. The driver of the other vehicle is seriously injured and sues the national denominational agency with which the church is affiliated, claiming that it is responsible for the volunteer’s negligence on the basis of agency.
A youth pastor engages in a sexual relationship with an adolescent in a church. The adolescent files a lawsuit against regional and national denominational agencies with which the church is affiliated, claiming that they are vicariously liable for the youth pastor’s conduct on the basis of agency.

In both of these examples, the plaintiffs rely on their interpretation of the governing documents of the church and denominational agency to support their claims of liability. Again, such appeals by plaintiffs to seek court interpretation of the governing documents of religious organizations will be unsuccessful under the church autonomy doctrine.

Napolitano v. St. Joseph Catholic Church, 308 So.3d 274 (Fla. App. 2020).

Legal Developments

Court Barred by First Amendment from Resolving a Dismissed Minister’s Terminated Retirement Benefits

The court concluded that the plaintiff “sought review of the procedures that resulted in ecclesiastical decisions and necessitated a review of religious law and practice, which is exactly the inquiry that the First Amendment prohibits civil courts from undertaking.”

Richard R. Hammar, Attorney, CPA

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State: Federal
Categories: First Amendment, Judicial Resolution of Church Disputes, Retirement Plans

Key point. Breach of contract claims by dismissed ministers, no matter how meritorious, cannot be resolved by the civil courts if doing so would require an interpretation of religious doctrine, or involves a claim that a decision by the highest ecclesiastical tribunal of a hierarchical denomination did not comply with the church’s laws and regulations.

A federal appeals court ruled that it was barred by the First Amendment religion clauses from resolving a dismissed minister’s claim that a denominational pension board acted improperly in terminating his retirement benefits pursuant to denominational rules when he was “defrocked” and ceased to be a minister in good standing.

An ordained minister (the “plaintiff”) began collecting benefits in 2009 after fulfilling the three conditions identified in his human resource manual for eligibility: (1) he had remained as a member in good standing of the denomination, (2) completed 10 years of full-time paid service for the denomination, and (3) had reached or exceeded retirement age.

The plaintiff’s retirement benefits were terminated for not “remaining as a member of good standing of the denomination” after being defrocked and dismissed from the denomination. The plaintiff sued the denomination, claiming that the termination of his retirement benefits constituted a breach of contract and a violation of the denomination’s covenant of good faith and fair dealing. A federal district court ruled that the lawsuit turned on an “interpretation of what constitutes a ‘member in good standing’ under denominational rules of governance, custom, and faith” and any ruling by the court would violate the religious freedom guaranteed by the First Amendment.

A federal appeals court affirmed the trial court’s dismissal of the case. The court observed:

The [trial] court correctly dismissed the lawsuit. A dispute involving the application of church doctrine and procedure to discipline one of its members is not appropriate for secular adjudication. The plaintiff’s claims, which were predicated on his defrocking, his excommunication, and the termination of his retirement benefits due to a “theological disagreement” would have required encroachment into matters of church dogma and governance. Based on “the separation of church and state principles required by the … First Amendment … the [trial] court could not interfere with the purely ecclesiastical decisions of the [denomination] regarding the plaintiff’s fitness to serve in the clergy or to remain a member of the denomination.

Civil courts may apply neutral principles of law to decide church disputes that involve no consideration of doctrinal matters, but the plaintiff’s lawsuit required examination of church doctrine and polity. His claims … turned on whether he was entitled to retirement benefits. And his entitlement to retirement benefits was conditioned on, among other things, that he remain as a member in good standing of the church. As the trial court stated, it could not “define ‘member’ for a specific church or denomination … because that would require defining the very core of what the religious body as a whole believes.” Likewise, to determine if the plaintiff had remained in good standing, the trial court explained, it would have had to “scrutinize documents related to church rules and discipline and … apply its interpretation of those rules to the plaintiff’s conduct. In other words, the court would have had to determine whether [the denomination] exercised its religion in accordance with the doctrine, faith, custom, and rules of governance” of the church. Because the plaintiff’s claims required an examination of doctrinal beliefs and internal church procedures, the trial court had no power to entertain his controversy with the denomination.

The court noted that the plaintiff’s claim that the denomination breached its implied covenants of good faith and fair dealing also would require review of a decision about internal church governance. The plaintiff alleged that he had been defrocked, excommunicated, and had his retirement benefits cancelled in violation of church procedural rules and the process afforded other ministers. But, the court noted, the United States Supreme Court issued a ruling in 1976 “prohibiting civil courts from undertaking an inquiry into whether the decisions of the highest ecclesiastical tribunal of a hierarchical church complied with church laws and regulations.” Serbian E. Orthodox Diocese v. Milivojevich, 426 U.S. 696 (1976). Such an inquiry by a civil court “would undermine the general rule that religious controversies are not the proper subject of civil court inquiry, and that a civil court must accept the ecclesiastical decisions of church tribunals as it finds them.”

In conclusion, the plaintiff “sought review of the procedures that resulted in ecclesiastical decisions and necessitated a review of religious law and practice, which is exactly the inquiry that the First Amendment prohibits civil courts from undertaking.”

What this means for churches

This case illustrates the view of many courts that breach of contract claims by dismissed ministers, no matter how meritorious, cannot be resolved by the civil courts if doing so would require an interpretation of religious doctrine, or, as in this case, involves a claim that a decision by the highest ecclesiastical tribunal of a hierarchical denomination did not comply with the church’s laws and regulations. 719 Fed.Appx. 926 (2018).

Legal Developments

Minnesota Court Rules on the Extent of First Amendment Protections for Church Discipline

Key point 6-10.1. According to the majority view, the civil courts will not resolve disputes

Richard R. Hammar, Attorney, CPA

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State: Minnesota
Categories: Church Members, First Amendment

Key point 6-10.1. According to the majority view, the civil courts will not resolve disputes challenging a church's discipline of a member since the First Amendment guaranty of religious freedom prevents them from deciding who are members in good standing of a church.

Key point 9-07. The First Amendment allows civil courts to resolve internal church disputes so long as they can do so without interpreting doctrine or polity.

Key point 10-15. The First Amendment limits, but does not eliminate, a church's liability for defamation.

A Minnesota court ruled that it was barred by the "ecclesiastical abstention" doctrine from resolving two church members' claims that they had been defamed by statements made about them in a church disciplinary meeting.

An elderly married couple (the "plaintiffs") were longstanding members of a Lutheran church. The church leadership convened a special membership meeting to determine if the plaintiffs should be excommunicated. At this meeting, the pastor read from a prepared document and made numerous statements about the plaintiffs. These statements included:

The plaintiffs were "actively involved in slander, gossip, and speaking against the pastor, the pastor's wife, and the church, including the claim that the pastor was stealing money from the church."
The plaintiffs had "intentionally attacked, questioned, and discredited the integrity" of the pastor and other church leaders.
Members had seen the plaintiffs display "anger and disrespect" toward the pastor.
The plaintiffs had publicly engaged in "sinful behavior" inside and outside the church.
The plaintiffs had engaged in behavior unbecoming of Christians.
The plaintiffs had "refused to meet for the purpose of confession and forgiveness."
The plaintiffs had "refused to show respect" toward the church's leadership.
The plaintiffs had "led other people into sin."
The plaintiffs had engaged in "slander and gossip" and refused to stop.
The plaintiffs had "refused to follow the words and teachings of God."

During the same meeting, the pastor displayed a document containing additional statements about the plaintiffs. These referenced numerous alleged defamatory statements made by the plaintiffs against the pastor, and accused the plaintiffs of "breaches of confidentiality" and causing dissention among the membership.

The plaintiffs sued the pastor and church, claiming that their statements about the plaintiffs were defamatory and injured their character and reputation in their small community. The pastor and church asked the court to dismiss all of the plaintiffs' claims on the ground that they pertained to church governance, membership, and discipline and therefore the civil courts were barred by the First Amendment guarantee of religious freedom from resolving them.

The trial court concluded that because all of the alleged defamatory statements "were made in the context of internal church governance and involve the reasons and motives for disciplining the plaintiffs," the court lacked jurisdiction under the so-called "ecclesiastical abstention" doctrine to resolve the plaintiff's claims. The plaintiffs appealed.

A state appeals court began its opinion by noting:

Under the ecclesiastical abstention doctrine, courts lack subject-matter jurisdiction if the disputed topic is "strictly and purely ecclesiastical in its character, a matter over which the civil courts exercise no jurisdiction, a matter which concerns theological controversy, church discipline, ecclesiastical government, or the conformity of the members of the church to the standard of morals required of them" (quoting the Supreme Court's decision in Serbian E. Orthodox Diocese v. Milivojevich, 426 U.S. 696 (1976).)

The court referenced its previous decision in Schoenhals v. Mains, 504 N.W.2d 233, 235 (Minn. App. 1993). The Schoenhals case was based on a letter a married couple received from their pastor terminating their membership in their church. The pastor read the letter to the entire congregation and discussed it separately with the couple's son, who was also a member of the church. The letter set forth the following reasons for terminating the couple's membership in the church:

A lack of financial stewardship with consistency and faithful tithing and offering over a given period of time.
A desire to consistently create division, animosity, and strife in the fellowship.
Direct fabrication of lies with the intent to hurt the reputation and the establishment of the church.
Backbiting, accusations, division, and lying are some of the most serious sins found in the Bible.

The couple sued the church and its pastor alleging defamation, among other claims. The trial court dismissed the couple's claims on the basis of the ecclesiastical abstention doctrine, and a state appeals court affirmed this ruling since any examination as to the truth of the pastor's statements would "require an impermissible inquiry into church doctrine and discipline" in violation of the First Amendment.

The court acknowledged that one of the pastor's statements—the accusation that the couple had fabricated lies intended to hurt the reputation and establishment of the church—appeared unrelated to church doctrine. But it reasoned that the statement "related to the church's reasons and motives for terminating the couple's membership" and therefore any examination into those reasons and motives "would also require an impermissible inquiry into church disciplinary matters." In addition, the court noted that the letter "was disseminated only to other congregation members, which strengthened its conclusion that the pastor's statements were related and limited to internal church disciplinary proceedings."

The court concluded that the plaintiffs' statements, like the statements in Schoenhals, were all related to "the church's motives and reasons for excommunicating them," and that "any examination as to the truth of these statements would be an impermissible inquiry into church doctrine under the First Amendment. Adjudicating the truth of statements concerning sin and Christian doctrine cannot be done without impermissibly intruding on issues that are strictly and purely ecclesiastical in their character."

The plaintiffs' attorney conceded that the court could not examine the truth of the statements concerning "sin" and Christian doctrine without violating the First Amendment. Nevertheless, he argued that four categories of statements—the breach of confidentiality, lying or perpetuating false information, accusing the pastor of stealing money, and the reported complaints of other congregation members concerning the plaintffs' behavior—could be resolved by the court based on secular, legal principles. The court disagreed:

This argument overlooks why the statements were made and the context in which they were made. In Schoenhals, we declined to inquire into any statements that related to a church's reasons and motive for terminating membership, even if the alleged defamatory statements appear unrelated to church doctrine on their face. Likewise here, any examination into whether the statements were truthful would be an "impermissible inquiry into church doctrine and discipline, because the statements were directly related to the church's reasons for excommunicating the plaintiffs. Furthermore, these statements all occurred during the context of internal church disciplinary proceedings … that were specifically designed to determine membership status at the church.

The court concluded: "In concluding that the plaintiffs' claims must be dismissed, we do not minimize the concerns that brought them to court … . But the separation of church and state, a principle enshrined in the Minnesota and United States Constitutions, prevents a court from determining the merits of the plaintiffs' dispute with their former church. Our decision here does not excuse any defamatory behavior that may have occurred in a sacred setting; it merely honors the separation of church and state by avoiding secular intrusion into the heart of religious concerns: who may be a member of the church; what standards of behavior are required of them; and how and when members may be disciplined."

What this means for churches

This case illustrates what many courts call the "ecclesiastical abstention" doctrine. Under this doctrine the civil courts are barred by the First Amendment religion clauses from resolving most internal church disputes. While not using the terminology "ecclesiastical abstention," the United States Supreme Court described the basic principle in a 1976 ruling in which it noted that the civil courts lack jurisdiction over internal church disputes that are "strictly and purely ecclesiastical in [their] character … a matter which concerns theological controversy, church discipline, ecclesiastical government, or the conformity of the members of the church to the standard of morals required of them." Serbian E. Orthodox Diocese v. Milivojevich, 426 U.S. 696 (1976). The concept of ecclesiastical abstention prevented the Minnesota court from resolving the plaintiffs' defamation claims.

There is one additional point in the court's decision worth noting. In the court's previous decision in the Schoenhals case, it concluded that allegedly defamatory statements disseminated only to other congregation members "strengthens" the conclusion that such statements "are related and limited to internal church disciplinary proceedings" that are beyond the jurisdiction of the civil courts. For the greatest protection, statements concerning the discipline of members should be disclosed only to church members, since this may trigger the "qualified privilege" that protects the limited disclosure of statements pertaining to matters of "common interest" from defamation and similar claims. Pfeil v. St. Matthew Church, 2015 WL 134055 (Minn. App. 2015).

Legal Developments

Exemption of Unemployment Services in the Employ of a Church Doesn’t Violate First Amendment

Terminated employee unable to sue church for lack of unemployment benefits.

Richard R. Hammar, Attorney, CPA

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State: Texas
Categories: Compensation and Benefits, First Amendment

Key point. The exemption of church employees from state unemployment compensation laws does not violate the First Amendment's Establishment or Free Exercise of Religion Clauses.

A Texas court ruled that the exemption of services in the employ of a church from the unemployment compensation system did not violate the First Amendment's prohibition of the establishment of religion.

A church terminated the employment of its pianist and organist (the "plaintiff"). The plaintiff filed a claim for unemployment benefits. His claim was denied because he had not earned sufficient covered wages to establish a claim for unemployment benefits. The plaintiff filed a lawsuit arguing that exemption of church employment in establishing a claim of unemployment benefits violated the First Amendment's guarantees of the nonestablishment and free exercise of religion.

Background

Under the Texas unemployment compensation system, employers make contributions in the form of excise taxes to the compensation fund. Eligible individuals who are unemployed through no fault of their own may receive unemployment benefits from the compensation fund. An individual is eligible for unemployment benefits if he or she is totally unemployed in a "benefit period." Employment covered by the unemployment compensation system generally includes service performed by an individual for wages. There are, however, a number of exemptions, including "service in the employ of a church." The Federal Unemployment Tax Act (FUTA) contains an identical exemption from the definition of "employment." Service in the employ of a church or a religious organization has been exempted from the Texas unemployment compensation system since it was established in 1936.

First Amendment's "Establishment Clause"

The plaintiff claimed that the exemption of services performed for a church from the definition of covered employment violated the Establishment Clause of the First Amendment. The Establishment Clause provides that "Congress shall make no law respecting an establishment of religion."

When, as in this case, a law "affords a uniform benefit to all religions," rather than "drawing distinctions on religious grounds," a court should evaluate whether the law violates the Establishment Clause under the three-part test in Lemon v. Kurtzman, 403 U.S. 602 (1971). Under this test, a law (1) must have a secular legislative purpose, (2) must have a principal or primary effect that neither advances nor inhibits religion, and (3) must not foster "an excessive government entanglement with religion."

The plaintiff claimed that the tax exemption for churches under the unemployment statute did not meet the first prong of the Lemon test because it did not have a secular purpose. The court noted that "a statute need not have exclusively secular objectives to meet the secular purpose standard; the touchstone is neutrality, and it is only when the government acts with the ostensible and predominant purpose of advancing religion that it violates the first prong of the Lemon test."

In this case, the Texas legislature stated the purpose of establishing the unemployment compensation system was to provide for the support of individuals who were unemployed through no fault of their own. The purpose for the exemption of service in the employ of a church from the definition of employment in the FUTA (which is identical to the exemption in the Texas statute) was "to address a concern that coverage of workers whose employment patterns are irregular or whose wages are not easily accountable would adversely affect administration of the program. These purposes are secular in nature."

The court also noted that the exemption of church employment was not the only variety of employment that was exempt under the unemployment statute. Rather, "a number of types of work are excluded from employment … reflecting the legislature's decision that the entities for whom that work is performed should not be subject to the burden of paying the tax required by the unemployment compensation system." The breadth of the exemptions "demonstrates the exemption [of church employment] was not aimed at establishing, sponsoring, or supporting religion."

The court concluded that the exemption of church employment from unemployment coverage did not violate the second or third prongs of the Lemon test (a principal effect that neither advances nor inhibits religion, and no excessive entanglement between church and state).

First Amendment's "Free Exercise of Religion" Clause

The plaintiff claimed that the exemption of church employment from unemployment coverage under the Texas statute violated his constitutional right to the free exercise of his religion, specifically his right to play music during worship services. The Free Exercise Clause provides that "Congress shall make no law … prohibiting the free exercise [of religion]."

The court noted that a free exercise claim will be sustained only if the government "has placed a substantial burden on the observation of a central religious belief" without "a compelling governmental interest justifying the burden." The government imposes a substantial burden on the free exercise of religion by forcing an individual to choose between "following the precepts of his religion and forfeiting benefits," or by "putting substantial pressure on an adherent to modify his behavior and to violate his beliefs." However, an individual's right to freely exercise his religion "is not necessarily violated simply because his religious practice is burdened by a governmental program."

The court concluded that the plaintiff provided no explanation of how the exemption in the unemployment statute put substantial pressure on him "either to modify his behavior or to violate his religious beliefs. Further, we can discern nothing about the exemption that affected his ability to play music during church services, violated his religious beliefs, or required him to work under conditions forbidden by his religion … . We conclude that exempting service performed in the employ of a church from the definition of employment placed, at most, an inconsequential burden on the plaintiff's ability to play music during church services and does not violate his right to freely exercise his religion."

What this means for churches

This is one of the few cases to directly address the constitutionality of the exemption of church employees from coverage under state unemployment compensation laws. The court's conclusion that this exemption is constitutional will be a useful precedent in future challenges in other states. Spicer v. Texas Workforce Commission, 430 S.W.3d 526 (Tex. App. 2014).

Legal Developments

Are Churches Exempt from City Water Assessments?

Yes, one court ruled.

Richard R. Hammar, Attorney, CPA

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State: New York
Categories: First Amendment, Freedom of Religion

Background

A city's department of environmental protection attempted to collect water and sewer charges from a church. The church's request for an exemption was denied because the church property contained apartments for three staff members (the pastor, church business administrator, and a full-time teacher at a church-operated school).

The pastor wrote the city, claiming that "we are a religious organization, providing this community with a vital service. Our only income are gifts that come from the members of this community. We cannot pay these charges, moreover, we are entitled to exemption." The city disagreed, and assessed $12,000 in back charges against the church and imposed a "tax lien" on the church's property. The church appealed. It asked a court to grant its exemption from the water and sewer charges, reverse the city's assessments and penalties against it, and remove the tax lien.

A city ordinance contained the following exemption: "The real estate owned by any religious corporation … actually dedicated and used exclusively as a place of public worship [is] hereby exempt from the payment of any sum of money, whatsoever to said city, for the use of water taken by same from said city." A similar exemption applies to sewer charges.

The court's ruling

The appeals court ruled that the exemption of religious corporations from water and sewer charges "should be interpreted as applying to all property used in furtherance of the corporation's purpose," and in this case "that would include the housing provided its pastor, teacher and administrator staff promoting the primary purpose of the institution."

The court added that even if the staff members who were provided housing were not promoting the purposes of the church, the city should have granted a "partial exemption" for all of the church's property less the three apartments. The city's denial of any exemption was "legally wrong, arbitrary and capricious."

What this means for churches

Many cities exempt churches from water and sewer fees. This case demonstrates that such an exemption will not necessarily be lost because of uses of church property that "promote the primary purpose" of the church.

Bathelite Community Church v. Department of Environmental Protection, 797 N.Y.S.2d 707 (N.Y. Sup. Ct. 2004).

Legal Developments

First Amendment Bars the Civil Courts from Intervening in Church Elections

A New Jersey court ruled that a trial court acted improperly in overseeing a church business meeting and the election of a pastor.

Richard R. Hammar, Attorney, CPA

Bio

State: New Jersey
Categories: Charters, Constitutions, and Bylaws, First Amendment, Officers, Directors, and Trustees

Key point 6-06.1 . Churches select their officers and directors in various ways. For example, it is common for members of a church board to be elected by the church's membership, while officers are elected by the board. The civil courts generally refrain from resolving disputes involving the selection of church officers and directors on the ground that the first amendment guaranty of religious freedom prevents them from becoming involved in ecclesiastical disputes.

Key point 6-09.2. Church members have such legal authority as is vested in them by their church's governing documents, and in some cases by state nonprofit corporation law.

A New Jersey court ruled that a trial court acted improperly in overseeing a church business meeting and the election of a pastor in a church that was beset with internal strife over doctrinal issues.

A Baptist church was organized in 1980. The church's bylaws describe church governance and administration. The bylaws establish three bodies to govern the affairs of the church—an executive board, a board of trustees, and a board of deacons. The executive board consists of the pastor, the board of trustees, and the board of deacons; it meets monthly and discusses all matters of the church, spiritual and financial. The trustee board consists of nine to eleven members elected annually and holds in trust all property belonging to the church, and designates the bank where the funds of the church shall be deposited. The deacon board assists the pastor in his spiritual work and consists of deacons appointed by a "free vote of the church, after recommendation by the pastor and deacons who possess the qualifications as recorded in 1 Timothy 3:8-13." In addition, there is an advisory council, consisting of the elected officers of the church and the chairs of all standing committees. The council is authorized to review and amend all agenda items before presentation to the church. Other officers include a treasurer, a financial secretary, and a clerk.

The bylaws specify that election of church officers is to be held during annual meetings of the church in the third week of November. The bylaws prescribe the process for nominating persons for church office. The advisory council appoints a nominating committee who prepares a list of members qualified to hold the various church offices, interviews the candidates to ascertain their willingness to serve, nominates one or more persons from the list for each office, and reports the nominees to the congregation. In addition, any member present at the annual meeting and qualified to vote has the privilege of nominating "any eligible person for any office not so nominated."

The church hired a senior pastor in 1989 and entered into a "pastoral agreement" obligating him to be cooperative, act in agreement with the deacons, remain in accord with the executive board, abide by the church constitution and bylaws, and espouse Baptist doctrines. In 1994, the pastor began efforts to implement a "full gospel" ministry at the church, a doctrinal teaching at odds with church theology before his arrival on the scene. Despite the executive board's disapproval, in 1997 and 1998 the pastor took several steps to advance the full gospel ministry at the church, including bringing a full gospel bishop to the church to instruct the executive board on full gospel theology, taking church members to a full gospel Baptist conference, and petitioning the deacon board for spiritual and financial support for the full gospel ministry. Based on the recommendation of the deacon board, the executive board voted to call on the pastor to honor all aspects of his pastor agreement and, if he could not, to inform him that steps would be taken to remove him from office. In addition, the executive board voted to forbid Carlton from introducing any full gospel teachings at the church's worship services. Carlton, apparently, agreed to abide by these recommendations. However, he later attacked the executive board and told the congregation that "I am going to do what I have to do." The executive board and the advisory council voted to terminate the pastor.

The decision to remove the pastor created such a tumult within the church that the executive board padlocked church doors and suspended church services. The pastor's supporters held an outdoor meeting at which time they retained the pastor, abolished the church's executive board and advisory council, abolished the church bylaws, and appointed a new 5-member committee to draft new bylaws. A civil lawsuit was filed to determine which group controlled the church. A trial court appointed an attorney as "moderator" to assist the court in resolving the underlying dispute between the parties. Specifically, the moderator was empowered to (1) establish the criteria for membership and the eligibility of members of the church to participate and vote at the annual meeting; (2) determine the issues to be presented at the meeting; (3) determine the voting procedures at the meeting; (4) determine the ballot questions to be presented at that meeting; (5) establish the form and manner of notice to be given; (6) resolve any other matters that would permit a fair and reasonable membership meeting to occur.

The moderator designated seven members of the church to serve as the nominating committee and directed that the committee propose a slate of candidates for the following positions: board of trustees, treasurer, financial secretary, clerk, and superintendent of Sunday school. After determining voter qualifications, the moderator supervised the annual meeting in which the pastor's supporters prevailed by a vote of 180 to 153. As a result, ecclesiastical control of the church passed from the church's executive board to a board comprised of the pastor's supporters. In a subsequent meeting, the congregation voted to retain the pastor by a vote of 152 to 125.

Several of the ousted church leaders appealed the court's ruling. The ousted leaders claimed that the church elections were void because they were contrary to the church's bylaws that vested ecclesiastical authority to determine the eligibility of nominees for church office exclusively in internal church governing bodies. By holding that nominations could be made by the membership without prequalification by the nominating committee the trial court impermissibly intruded into matters of church governance, practice, and polity. The pastor and his supporters argued that the trial court correctly interpreted church law to mean that the only rule is that the majority rules and that their faction represented the majority.

A state appeals court concluded that "in the absence of clear and unambiguous direction in church law, an intrachurch dispute over eligibility for nomination to church office, implicating as it does the more fundamental question of church governance and congregational structure, does not present a proper issue for judicial consideration." It concluded,

Irrespective of the approach used, courts are admonished to scrupulously avoid incursions into questions of ecclesiastical polity or doctrine that would be constitutionally impermissible. To be sure, the task of reconciling respect for the autonomy of religious organizations with the responsibility of courts to resolve conflicts involving civil matters is a difficult one. Admittedly, in some instances there is a gray zone between express secular terms and religious doctrine, and the distinction between the court's duty to abstain from religious questions and to decide legal disputes is blurred. Complicating the matter is the fact that the once simple dichotomy between hierarchical and congregational polities does not reflect the diversity of contemporary denominational structures ….

In the present case, the trial court adjudicated no simple property or contract dispute but rather an essential issue of church governance, polity, and administration—namely whether the church is a true democracy controlled by its membership or a more republican, representative structure governed by internal ecclesiastical bodies. Purporting to apply so-called "neutral principles" of law, the trial court opted for the former based on an interpretation of church bylaws that vested nominating authority in any church member without prior screening and recommendation by the nominating committee …. We conclude that the trial court's ruling in this regard was an inappropriate application of "neutral principles" jurisprudence. First and foremost, the method of neutral principles does not allow for construction of church documents if their interpretation is the focus of dispute and if such documents are not so clear, provable, and express that the civil courts could enforce them without engaging in a searching, and therefore impermissible, inquiry into church polity. Here, the issue of eligibility for office was a highly controverted question of faith within the congregation. Despite the obvious division of opinion, the basis for the trial court's resolution allowing for floor nominations is unclear, as are the rules of common law it relied upon to structure the church-member relationship implicated in this matter. In essence, the trial judge interpreted the term "eligible" to be without any religious significance despite plaintiff's contrary contention that the nominating committee pre-screens candidates for spirituality and religiosity. We emphasize that the application of neutral principles does not require courts to "neutralize" ecclesiastical words.

In the absence of clear direction in church law, judicial inquiry into church procedures is precluded. Although courts may intervene to determine whether established procedures of a religious organization, as proven, have been followed, courts should not intervene where such procedures are … less than clearly defined, or ambiguous. Because of such uncertainty, resolution of intrachurch disputes cannot be made without extensive, and therefore impermissible, inquiry into religious law and polity …. In this case, inquiring whether the nominating committee has exclusive ecclesiastical authority to determine eligibility necessitates interpretation of ambiguous religious law, the resolution of which would require a deeper probe into the congregational structure and allocation of power within the church. For instance, in the absence of an express procedure in the church bylaws, inquiry need be made as to where within the church the rules of polity, accepted by its members before the schism, had placed ultimate authority over the eligibility question …. Simply stated, neutral principles of civil law do not include standards for judging appropriate qualities for church leadership ….

Application of these principles compels judicial abstention in this case. The trial court's opposite conclusion … unwittingly entrenched itself in church affairs …. The court below became entangled in election procedures, appointing a monitor with broad powers to determine not only qualifications of voters, but in essence qualifications for office. Unfortunately, the court's involvement did not end there. After approving the results of the election for church officers, the court, through its appointed representative, continued to monitor and supervise the pastoral election after first designating those members responsible for recommending candidates to the church for consideration and vote, a task that the bylaws clearly and expressly assign elsewhere.

What this means for churches

This case presented the difficult question of the appropriate role the civil courts should play in overseeing church elections. The court concluded that the first amendment bars the civil courts from intervening in church elections involving questions of ecclesiastical polity or doctrine. Such was the case here, since the basic questions involved the selection of the church's pastor and lay leaders. The opposite conclusion would entangle the civil courts in church affairs. The court concluded that it could intervene in an internal church dispute to see if a church had followed its own procedures, but only if those procedures were clear and "proven" and a decision could be made without "extensive, and therefore impermissible, inquiry into religious law and polity." Solid Rock Baptist Church v. Carlton, 789 A.2d 149 (N.J. Super. 2002).

Legal Developments

Church Liability for Accounting Irregularities

A court’s ruling provides important insight for all church leaders.

Richard R. Hammar, Attorney, CPA

Bio

State: District of Columbia
Categories: First Amendment, Judicial Resolution of Church Disputes

Background

A court in the District of Columbia ruled that the first amendment guaranty of religious freedom prevents the civil courts from resolving internal church disputes over accounting and reporting practices, except in limited circumstances. The court relied on principles that will be useful precedent to other churches in similar cases.

Can a church be sued by its own members as a result of sloppy accounting and reporting practices? This was the issue before a court in the District of Columbia in a recent case. A member sued her church on the basis of "negligent accounting and reporting to church members." The court's ruling will be instructive to all church leaders, particularly those with any concerns regarding the regularity of their church's accounting and reporting practices.

Facts

A woman who had served as a church's financial secretary for many years was dismissed as a result of an internal reorganization that eliminated her position. She later filed a class action lawsuit on behalf of herself and "all past and present members" against her church, claiming that it was guilty of negligent accounting and reporting in violation of various "standards" applicable to churches. In particular, the woman alleged the following church violations:

failing to monitor funds received from all sources for more than twenty years

permitting itself to "fall under the complete domination" of the pastor

failing to comply with social security and other federal and local tax laws

failing to separate the church's religious operations from its "purely secular" activities such as a child care center, an apartment complex, and a grocery store

failing to account for funds turned over to the wife of the founding pastor

failing for more than fifteen years to account for the receipts averaging over $150,000 from the annual church banquet

failing to provide annual financial reports to the members based on monthly statements prepared by the former financial secretary

failing to account for church funds collected from "annual rallies" of various groups within the church

failing to account for the "tithes" paid by "more than 3,000 dues paying members of the church

failing to maintain accurate records of funds received by the church prior to the time the former financial secretary was employed

The church asked the trial court to dismiss the lawsuit on the ground that it addressed matters of internal church governance. The trial court refused, and the church appealed.

The court's ruling

On appeal, the church argued that the civil courts have no jurisdiction to resolve internal church controversies. The woman claimed that the case could be resolved on the basis of neutral principles of law involving no inquiry into religious doctrine. She compared the case to a secular dispute over church property, which the civil courts have been able to resolve in some situations without offending the first amendment's guaranty of religious freedom.

The appeals court began its opinion by acknowledging that the first amendment "precludes civil courts from adjudicating church fights that require extensive inquiry into matters of ecclesiastical cognizance." However, "occasions can arise when civil courts are permitted to address church activity without running afoul of the first amendment." The central question, according to the court, was whether a lawsuit claiming negligent accounting and reporting by a church "can be decided, consistent with the [first amendment] by applying the objective, well—established concepts of accounting and recordkeeping …."

The court concluded that there are two possible circumstances that would permit a court to apply clear, objective accounting and reporting criteria to church financial practices without implicating church doctrine:

(1) if the principles are so universally … applicable to every organized church that they can, indeed must, be taken for granted without need for church action to adopt them; or

(2) even if these principles are not automatically applicable to every church, they are applicable in a particular case because the church has in fact adopted them

In either circumstance, "the court would not have a role in deciding what principles apply to the church; the court merely would be asked to apply, without ecclesiastical judgment or intrusion, a previously prescribed, authoritative, nondiscretionary, and clear, policy."

The court concluded that neither exception existed in this case, since there are no "universally accepted" principles of church accounting and reporting that apply to all churches, and the church in this case had never adopted a particular set of financial or reporting standards. It observed that "[t]he possibility of universal, indisputable accounting and reporting criteria for all churches is almost self—evidently contrary to reason." The court cautioned that if a church does adopt "clear, objective accounting and reporting standards" that do not involve the application of religious doctrine "then arguably a civil court can apply them-much as a court can resolve secular disputes over church property-because the church itself presumably has obviated all first amendment concerns." On the other hand, if a church has not adopted specific accounting and reporting standard then a court, "by having to decide whether particular principles should be applied, will inevitably have to exercise discretion over a matter that initially requires ecclesiastical judgment." The court added:

a church's financial regime, including any required reports to members, necessarily reflects an array of decisions about a member's obligation to pledge funds, and about the leaders' corresponding responsibility to account for those funds, that a civil court cannot arbitrate without entangling itself in doctrinal interpretations.

In support of its decision, the court pointed out that "accounting is an area riddled with major subjective decisions," and that when a church is involved "those subjective decisions raise questions of internal church governance which are often themselves based on the application of church doctrine."

To illustrate its point, the court noted several examples of questions that must be resolved by the church itself rather than by the civil courts:

What should be the collection, tithing, or offering practices of the church?

Should the church pursue pledges from-or take any other particular type of action affecting-members who neglect to remit their obligations?

What cash management and investment decisions should be made?

Who in the church establishes its spending priorities?

Should the pastor have one or more discretionary funds?

Should there be an audit committee, and if so, should its membership be internal, external, or both, and how many members of each type should there be?

Should the church maintain any of its funds as imprest accounts useable only for specified purposes, or should church finances be operated as a general account?

For each of the above questions, who makes the decision?

The court then ruled that a lawsuit alleging that a church has negligently failed to follow its own accounting or reporting procedures must specifically refer to the procedures that have been violated. Vague allegations that the church has disregarded such procedures are not enough, since the first amendment protects churches from having to defend against such possibly meritless charges. The court observed:

A mere reference to the existence of published accounting standards, without alleging that they … apply [or] that the church formally has adopted them, would leave the [lawsuit] too fuzzy for the court to be sure it constitutionally can rule. In short, because a [lawsuit] challenging church action is not easily cognizable in a civil court, there is a heightened pleading requirement to assure that the [church] will not be unduly burdened ….

[W]hen the first amendment casts a shadow over the court's … jurisdiction, the plaintiff is obliged to plead unqualified jurisdictional facts that clearly take the case outside the constitutional bar. There is no justifiable reason to make a church answer a complaint, let alone go through discovery, unless a plaintiff specifically and unequivocally pleads all facts necessary to establish the court's jurisdiction.

The court noted that the requirement that lawsuits brought against churches for negligent accounting or reporting refer to specific rules that have been violated is not new. It referred to the rule adopted in many states that lawsuits alleging fraud must specifically plead facts constituting fraud, and cannot rely on vague generalizations. Similarly, some states will not permit churches to be sued for negligent selection of clergy by victims of a minister's sexual misconduct unless the lawsuit pleads specific incidents of prior misconduct by the minister that were known to the church. The most prominent court to reach this result is the Ohio Supreme Court in Byrd v. Faber, 565 N.E.2d 584 (Ohio 1991), a case addressed fully in a feature article in the September—October 1991 edition of this newsletter.

The court acknowledged that "a church's very failure to adopt accounting and reporting standards effectively protects church leaders against civil court scrutiny that might well occur if the church, acting more responsibly, had adopted objective criteria that a court could apply without intruding on church doctrine." However, it insisted that this concern "overlooks the primacy of church tribunals for deciding such matters, consistent with the first amendment." It further noted that "absent an effective church tribunal or adoption of standards a civil court can apply without crossing an ecclesiastical line, a church member's only remedy for perceived financial irregularity appears to be cutting one's losses by leaving the membership."

What this means for churches

This case is highly relevant to all church leaders, and should be studied carefully. While it is not binding outside of the District of Columbia, the court's ruling represents one of the few attempts by a court to address church accounting practices. For this reason, the case may be given greater weight in other jurisdictions. Summarized below are the most significant aspects of the court's ruling.

1. When will a court review church accounting irregularities? Some of the alleged accounting and reporting irregularities in this case are not uncommon. For example, many churches have been accused of failing to comply with social security and other federal and state tax laws; failing to properly account for funds raised for a specific purpose; or failing to provide accurate financial reports to donors. Can concerned members have a civil court intervene and "correct" such irregularities if they are not happy with their church's response? This is an important question that few courts have addressed.

The court in this case acknowledged that the first amendment guaranty of religious freedom greatly restricts the authority of the civil courts to resolve internal church disputes, including those involving alleged accounting or reporting irregularities. However, the court concluded that the first amendment would not bar the civil courts from resolving such disputes if they could do so on the basis of clear, objective accounting and reporting criteria requiring no inquiry into religious doctrine-assuming that a church in fact had adopted them. A civil court could enforce such rules since it "would not have a role in deciding what principles apply to the church; the court merely would be asked to apply, without ecclesiastical judgment or intrusion, a previously prescribed, authoritative, nondiscretionary, and clear, policy."

Example. A church board adopts standards for handling designated contributions that were formulated for all charitable organizations. A donor questions whether the church is following the standards. When church leaders refuse to respond to the donor's concerns, she asks a civil court to intervene. A court may decide that it can do so since the issue of whether the church is complying with these standards involves no inquiry into religious doctrine.

Example. A member is concerned that his church board has spent some designated missions funds for general administrative purposes. When church leaders refuse to respond to the member's concerns, he asks a civil court to intervene. He is unable to point to any specific accounting principles the church has adopted that govern the dispute. According to the case discussed in this feature article, the court will not intervene since the first amendment guaranty of religious freedom protects internal church financial decisions from civil court review-if no set of accounting principles has been adopted by the church that can be enforced by a civil court without delving into church doctrine.

2. Questions the civil courts cannot resolve. The court gave eight examples of accounting and reporting irregularities that the civil courts cannot resolve: (1) What should be the collection, tithing, or offering practices of the church? (2) Should the church pursue pledges from-or take any other particular type of action affecting-members who neglect to remit their obligations? (3) What cash management and investment decisions should be made? (4) Who in the church establishes its spending priorities? (5) Should the pastor have one or more discretionary funds? (6) Should there be an audit committee, and if so, should its membership be internal, external, or both, and how many members of each type should there be? (7) Should the church maintain any of its funds as imprest accounts useable only for specified purposes, or should church finances be operated as a general account? (8) For each of the above questions, who makes the decision? The civil courts cannot resolve these questions since they cannot do so without delving into church doctrine and polity.

Example. A Minnesota court dismissed a lawsuit brought by Lutheran pastors against a denominational pension board for allegedly breaching their fiduciary duty to participants by not investing in companies that did business in South Africa. The Evangelical Lutheran Church in America (ELCA) established a board of pensions in 1988 to manage and operate a pension fund for Lutheran pastors and lay employees "exclusively for the benefit of and to assist in carrying out the purposes of the ELCA." The ELCA adopted the position that the system of apartheid in South Africa was so contrary to Lutheran theology that it had to be rejected as a matter of faith. The ELCA passed a resolution to "see that none of our ELCA pension funds will be invested in companies doing business in South Africa." The board of pensions enforced this policy from 1988 to 1993. A dissenting group of Lutherans opposed the ELCA's decision to use its assets as a political weapon and asked to withdraw their pension funds. When their request was denied they sued the board of pensions and the ELCA, claiming that both groups had violated their fiduciary duties to participants in the pension program by elevating social concerns over sound investment strategy. A state appeals court dismissed the lawsuit on the ground that a resolution of the lawsuit would require the court to interpret religious doctrine in violation of the first amendment's nonestablishment of religion clause. The court noted that "if a claim involves core issues of ecclesiastical concern, the potential for government entanglement in religious matters prevents judicial review." This was just such a case, the court concluded: "While the Board of Pensions is required to prudently invest its holdings, the ELCA created the Board to both provide for pastors' retirement needs and assist the ELCA in accomplishing doctrinal goals. The ELCA enacted the [apartheid] policy in an effort to further its social and doctrinal goals …. Accordingly, any review of the Board of Pensions' [investment policy] would entangle the court in reviewing church doctrine and policy." Basich v. Board of Pensions, 540 N.W.2d 82 (Minn. App. 1995).

3. Lawsuits alleging church accounting irregularities must be specific. Perhaps the most important aspect of the court's decision was its conclusion that lawsuits brought by persons alleging church accounting or reporting irregularities must specifically document that the church adopted accounting standards and that they were not followed. Vague allegations that a church's accounting practices were sloppy are not enough. The court observed:

A mere reference to the existence of published accounting standards, without alleging that they … apply [or] that the church formally has adopted them, would leave the [lawsuit] too fuzzy for the court to be sure it constitutionally can rule. In short, because a [lawsuit] challenging church action is not easily cognizable in a civil court, there is a heightened pleading requirement to assure that the [church] will not be unduly burdened.

The court insisted that this principle is required by the first amendment guaranty of religious freedom:

[W]hen the first amendment casts a shadow over the court's … jurisdiction, the plaintiff is obliged to plead unqualified jurisdictional facts that clearly take the case outside the constitutional bar. There is no justifiable reason to make a church answer a complaint, let alone go through discovery, unless a plaintiff specifically and unequivocally pleads all facts necessary to establish the court's jurisdiction.

The court insisted that this conclusion was not novel or unique. It cited the following examples of lawsuits that must specifically allege facts supporting a plaintiff's claims: (1) fraud; (2) ineffective assistance of counsel; and (3) allegations that a church is liable for a church worker's sexual misconduct since it was aware of similar incidents in the past. The court insisted that "no less should be required when the Constitution severely circumscribes the court's … jurisdiction over church controversies."

Key point.The court concluded that persons who sue churches are subject to a "heightened pleading requirement" if a resolution of the case would "unduly burden" the church's mission. This means that the lawsuit must plead specific facts which support the theory of liability. Vague or unsubstantiated allegations are insufficient, since they will force a church to divert resources from the prosecution of its religious mission to the defense of a potentially meritless lawsuit. Church leaders should be familiar with this principle, and be prepared to assert it in response to a lawsuit.

Example. A church is sued by a person claiming that he was discriminated against in an employment decision on the basis of his age. Since the church's defense of this lawsuit might burden the prosecution of its religious mission, the church should assert that the plaintiff must cite specific facts supporting the claim of discrimination. Vague generalizations of discrimination should not be enough.

Example. A church is sued by a person who claims that the church discriminates against women in its employment and disciplinary policies. Since the church's defense of this lawsuit might burden the prosecution of its religious mission, the church should assert that the plaintiff must cite specific facts supporting the claim of discrimination. Vague generalizations of discrimination should not be enough.

Key point. The court's decision may be summarized as follows:

A church does not have to adopt any particular set of accounting or reporting standards.

If a church does not adopt any set of accounting or reporting standards, the civil courts will not intervene in disputes alleging accounting or reporting irregularities. A court cannot apply standards that church leaders have not applied themselves.

If a church does adopt such standards, a civil court can resolve a dispute involving a violation of those standards only if it can do so without inquiring into religious doctrine. Further, such a lawsuit must recite facts demonstrating that the church adopted the standards, and that they were violated.

Bible Way Church v. Beards, 680 A.2d 419 (D.C. App. 1996).

Legal Developments

Can a Church Dismiss Members Who Sue the Church?

Court refused to issue an order prohibiting the church from conducting a meeting to dismiss the 75 members for suing the church.

Richard R. Hammar, Attorney, CPA

Bio

State: Ohio
Categories: Church Members, First Amendment

Can a church dismiss members who sue the church? That was the issue before an Ohio court.

A local Baptist church experienced an ongoing internal dispute over whether or not to build a new sanctuary. A group of 75 members sued the church, pastor, and board of deacons, challenging certain decisions that had been made. The board of deacons later voted (9 to 5) in favor of recommending to the congregation that the membership of all 75 dissidents be terminated.

A congregational meeting was called to vote on the issue, but the dissidents immediately sought a court order preventing the meeting from occurring. The dissidents argued that their church membership was a valuable right (some of them were fifth generation members of the church) that was being denied by the church’s action. They also claimed that the church bylaws did not authorize the board to dismiss members for suing the church. The church bylaws did authorize discipline or dismissal on the basis of “immoral or un-Christian conduct,” but the dissidents argued that this language did not extend to lawsuits brought against the church. They stressed that the right to go to court for the redress of grievances is a fundamental civil right that was not specifically restricted by the church bylaws.

On the other hand, the church vigorously maintained that members who sue the church are guilty of “un-Christian” behavior since “there is a basis in Scripture for the exclusion from church membership of those who take church disputes outside the church for resolution.” The court agreed with the church, and refused to issue an order prohibiting the church from conducting a meeting to dismiss the 75 members for suing the church.

The court based its decision on a 1976 decision of the United States Supreme Court, in which the Supreme Court concluded that the civil courts must accept the decisions of hierarchical churches concerning discipline of members and clergy. Serbian Eastern Orthodox Diocese v. Milivojevich, 426 U.S. 696 (1976). The Ohio court acknowledged that a Baptist church is “congregational” rather than hierarchical in structure, and accordingly the Supreme Court’s 1976 decision did not directly apply in this case. However, the court concluded that there should be no distinction between congregational and hierarchical churches regarding the effect of their decisions to discipline members. The court observed:

Creating a different standard for civil court review of church disputes for hierarchical and congregational churches would create differing levels of government intrusion into church affairs, presumably with more intrusion in the congregational houses of worship. But courts and government, under the first amendment, are required to treat all religious faiths equally and neutrally …. In light of this fundamental principle of neutrality, a civil court could not allow the decisions of a hierarchical church to go unchallenged while making detailed inquiries into the practices of a congregational church. Accordingly, the [the Supreme Court’s Serbian decision] should extend to congregational churches …. A secular court should not resolve disputes over who can be a member of a particular church regardless of whether that church is hierarchical or congregational.

The court also relied on the following language from an 1871 decision of the United States Supreme Court:

All who unite themselves to such a body [the general church] do so with an implied consent to its government, and are bound to submit to it. But it would be a vain consent and would lead to the total subversion of such religious bodies, if any one aggrieved by one of their decisions could appeal to the secular courts and have them reversed. It is of the essence of these religious unions, and of their right to establish tribunals for the decision of questions arising among themselves, that those decisions should be binding in all cases of ecclesiastical cognizance, subject only to such appeals as the organism itself provides for. Watson v. Jones, 80 U.S. 679 (1871).

The Ohio court further observed that “recent cases from other jurisdictions support the concept that congregational churches are free from secular court scrutiny of their internal practices and discipline.” Noting that civil court review of church property disputes is very limited, the court concluded: “The first amendment concerns which militate against court entanglement with property disputes of religious groups would be even more strongly applicable to membership problems within churches. The question of who is one’s co-religionist is more nearly central to issues of faith and practice revered by the first amendment than secular concerns such as who has the deed to the house of worship.”

What this means for churches

This case is important because it supports the right of churches to dismiss members for suing their church. Further, the court conceded that the 75 members who sued their church had violated a church bylaw prohibiting “un-Christian” conduct. A church wishing to impose discipline on members who sue the church should amend its bylaws to clarify that suing the church will be deemed unscriptural and unacceptable conduct. Appropriate scriptural references (e.g., 1 Corinthians 6:1-8) should be cited. Alexander v. Shiloh Baptist Church, 592 N.E.2d 918 (Ohio Com. Pl. 1991).

Legal Developments

Legal Requirements for Church Child Care Centers

Court rules that state law requiring church-operated child care facilities to be licensed, and prohibiting spanking, do not violate a church’s constitutional rights.

Richard R. Hammar, Attorney, CPA

Bio

State: New Mexico
Categories: First Amendment, Schools

Does a state law requiring church-operated child care facilities to be licensed, and prohibiting spanking, violate a church's constitutional rights?

No, said a New Mexico appeals court. A Baptist church operated a child care center pursuant to a state license for many years. The church has a policy, which it believes is mandated by the Bible, permitting teachers to spank children who misbehave. Ultimately, however, the church's pastor concluded that submitting the child care center to state licensure amounted to a subordination of the center to the secular state rather than to Jesus Christ.

Accordingly, the pastor refused to renew the center's license. The state filed suit against the church, seeking a court order prohibiting the church from any further operation of the center without a license. The church responded by arguing that application of the child care licensing law to the church's facility violated the first amendment's guaranty of religious freedom. A trial court disagreed with the church's position, and the church appealed.

A state appeals court also rejected the church's position and agreed with the state that the church could not operate its child care facility without a state license. The court relied on a 1990 decision of the United States Supreme Court (Employment Division v. Smith). Prior to 1990, the courts generally allowed interference with religious practices only if a "compelling state interest" could be shown. However, in Smith, the Supreme Court said that a compelling state interest is not required to justify the application of "neutral laws of general applicability" to religious organizations.

The New Mexico appeals court concluded that the state law requiring child care centers to be licensed was a neutral law of general applicability that could be applied to a church without any need to demonstrate a "compelling state interest." The same conclusion applied to the law's anti-spanking provision. The court refused to address the church's claim that its rights under the New Mexico Constitution were violated by the licensing requirement, since this argument had not made at trial and "was made so late in the appellate process." Health Services Division v. Temple Baptist Church, 814 P.2d 130 (N.M. App. 1991).

Legal Developments

Law Making Good Friday a Legal Holiday Does Not Violate the First Amendment

Does a Hawaii law declaring Good Friday to be a legal holiday violate the first

Richard R. Hammar, Attorney, CPA

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State: Hawaii
Categories: First Amendment, Freedom of Religion

Does a Hawaii law declaring Good Friday to be a legal holiday violate the first amendment's nonestablishment of religion clause? No, concluded a federal district court.

The court observed: "The primary purpose of the statute which establishes Good Friday as a legal holiday was to increase the number and frequency of legal holidays. This purpose is clearly secular.

The court also finds that the primary effect of the statute is secular. The Good Friday holiday allows the people of Hawaii to play or pray as they see fit. Even the plaintiffs concede that many more people can be found in Hawaii's parks and shopping malls on Good Friday than can be found in its churches.

Moreover, this court's finding that Good Friday is similar in nature to Thanksgiving and Christmas provides additional ground for insulating the Good Friday holiday from a successful constitutional challenge. Just as Christmas and Thanksgiving are permissible because of their partially secular observations and because they provide a uniform day of rest and relaxation for Americans, Good Friday has attained a secular position in this nation's traditional fabric and provides citizens of Hawaii with a uniform day of rest." Cammack v. Waihee, 673 F. Supp. 1525 (D. Hawaii 1987)

Legal Developments

Court Confirmed Civil Courts Are Prohibited from Resolving Church Property Disputes on the Basis of Religious Doctrine

A Florida court confirmed the general principle that the civil courts "are prohibited from resolving

Richard R. Hammar, Attorney, CPA

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State: Florida
Categories: Church Property, First Amendment

A Florida court confirmed the general principle that the civil courts "are prohibited from resolving church property disputes on the basis of religious doctrine."

The civil courts are without jurisdiction to resolve such disputes when the "underlying controversy concerns religious doctrine and only incidentally affects other matters." Archdiocese of Miami v. Sama, 519 So.2d 28 (Fla. App. 1987)

Legal Developments

Father’s First Amendment Rights not Violated by Requirement to Arrange for Child’s Attendance at Roman Catholic Church

Can a noncustodial parent who is a member of the Baptist faith be required, during

Richard R. Hammar, Attorney, CPA

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State: Illinois
Categories: First Amendment, Freedom of Religion

Can a noncustodial parent who is a member of the Baptist faith be required, during periods of visitation, to arrange for his minor child's attendance at the Roman Catholic church in which she was being raised by her mother?

Yes, concluded an Illinois appeals court. The father argued that the trial court's order, insofar as it directed him as the noncustodial parent to take his daughter to a Roman Catholic church and not to his Baptist church violated his constitutional right to religious freedom.

The court, in rejecting this claim, noted that the father was not required to "observe the laws of the Roman Catholic church, but only (1) to make the transportation arrangements for his 7-year-old daughter to fulfill her religious obligation when it falls during his visitation periods; and (2) not take the daughter to religious services other than those approved by the custodial parent. We find nothing in the order which would violate the father's first amendment rights to the free exercise of his religion. Rather, the order was clearly directed to the accommodation to be made in the child's best interests given that the custodial parent … has the right to direct the educational and religious training of the child, which in this case was in the Roman Catholic faith." In re marriage of Tisckos, 514 N.E. 2d 523 (Ill. App. 1987)

Legal Developments

Court Rejected School District’s Claim that Allowing School Facilities to Be Used for Religious Purposes Would Violate the First Amendment

Can a high school legally prohibit religious groups from using an auditorium that is available

Richard R. Hammar, Attorney, CPA

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State: Pennsylvania
Categories: First Amendment, Freedom of Religion, Schools

Can a high school legally prohibit religious groups from using an auditorium that is available without restriction to non-religious community groups?

A federal district court in Pennsylvania said no. Here are the facts. A Christian student group requested permission to use a high school auditorium for a one-night performance and evangelistic message by a noted magician. The students' application included the application fee of $1,379. When school authorities discovered that the proposed use of the auditorium included a religious message, they denied the application, citing a school policy prohibiting "use of school facilities for religious services, instruction, or activities."

The student group thereafter sued the school district, alleging a violation of the constitutional right of free speech. The court agreed, noting that "the state is not required to open its property to the public in order to allow it to engage in free speech, association and discussion—but once it does, rights of free speech and association guaranteed by the first amendment are entitled to be protected even if that activity includes religion or religious subjects."

The court emphasized that the school district had "opened the school facilities for general use by community groups," including boy scouts, girl scouts, Easter Seals, Kiwanis, Rotary, dance lessons, and a symphony orchestra. In addition, the school was used for adult evening classes which included instruction on occultic religious practices. Having created an "open forum" for free speech and assembly in its school facilities, the district could not deny access to any group on the basis of the content of its speech, even if the speech were religious in nature.

The court rejected the district's claim that allowing school facilities to be used for religious purposes would violate the first amendment's nonestablishment of religion clause: "Nothing in the establishment clause requires the state to suppress a person's speech merely because the content of that speech is religious in character."

The court warned that it would have reached a different conclusion had the evidence indicated that religious speakers "dominated" the open speech forum, or if use of the school facilities included "religious services." While noting that a school can lawfully prohibit all groups from meeting without violating the free speech rights of any group, it prohibited the school district from closing its "open speech forum" before the challenged performance was conducted.

Several churches and religious groups have been denied access to public school facilities that are made available to other community groups. The Pennsylvania ruling, while not binding in other states, will serve as useful precedent for religious groups seeking limited access to public school facilities. Gregoire v. Centennial School District, 674 F. Supp. 172 (E.D. Pa. 1987)

Legal Developments

Jehovah’s Witness congregation could not sue the church for defamation

The Montana Supreme Court ruled that a husband and wife who had been "disfellowshipped" from

Richard R. Hammar, Attorney, CPA

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State: Montana
Categories: Defamation, First Amendment

The Montana Supreme Court ruled that a husband and wife who had been "disfellowshipped" from a Jehovah's Witness congregation could not sue the church for defamation.

The couple had been disfellowshipped for marrying contrary to church doctrine. In announcing the decision to the congregation, the overseer remarked that the couple had been living in adultery according to church teachings and had been disfellowshipped for "conduct unbecoming Christians." The overseer added that "we got the filth cleaned out of the congregation, now we have God's spirit."

The court concluded that such comments were not defamatory since they were privileged and protected by the constitutional guaranty of religious freedom. As to the defense of privilege, the court remarked that "it is firmly established that statements of church members made in the course of disciplinary or expulsion proceedings, in the absence of malice, are protected by a qualified privilege." The remarks of the overseer were privileged, concluded the court, and did not involve malice since "malice is defined as reckless disregard for the truth [and] does not include hatred, personal spite, ill-will, or a desire to injure."

The court added that it "would be violating the [church's] right to free exercise of religion if [it] were to find [the church's] statements actionable under state defamation law." Rasmussen v. Bennett, 741 P.2d 755 (Mont. 1987).

Legal Developments

Court Lacked Jurisdiction to Resolve the Claims of Parishioners

A Michigan state appeals court held that it lacked jurisdiction to resolve the claims of

Richard R. Hammar, Attorney, CPA

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State: Federal
Categories: Church Members, First Amendment

A Michigan state appeals court held that it lacked jurisdiction to resolve the claims of parishioners that they had suffered intentional infliction of emotional distress as a result of their priest's actions.

Several parishioners withheld their financial support from the church because of their opposition to certain changes that a new priest had initiated. In response to this action, the priest refused to give communion to certain dissident members in the presence of the entire congregation, and verbally criticized others during services.

The court observed that "it is well settled that courts, both federal and state, are severely circumscribed by [the state and federal constitutions] in the resolution of disputes between a church and its members. Such jurisdiction is limited to property rights which can be resolved by application of civil law."

In rejecting the members claim that the church had intentionally caused them emotional distress, the court remarked: "This is quite a modern tort not yet recognized by the highest court in this state. Hopefully, it never will be. The awesome flood of litigation has already risen to the gunnels. If the courts were to offer to extract money from everyone who intentionally makes someone else mad, we would surely go under." Maciejewski v. Breitenbeck, 413 N.W.2d 65 (Mich. App. 1987)

Legal Developments

Congress Extending Copyright Violated First Amendment

A federal appeals court concluded that a special act of Congress giving the Christian Science

Richard R. Hammar, Attorney, CPA

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State: Federal
Categories: Copyright, First Amendment

A federal appeals court concluded that a special act of Congress giving the Christian Science Church extended copyright protection in a 1906 edition of Mary Baker Eddy's book Science and Health violated the first amendment's nonestablishment of religion clause.

In 1971, Congress enacted a special law extending copyright protection in the central and most sacred writing of Christian Science until the year 2046, in order to perpetuate the purity and integrity of the work. Without this special legislation, copyright protection would have expired no later than 1981. Such favored treatment of the central religious writing of a religious sect clearly violated the nonestablishment of religion clause: "When Congress departs from generalized copyright legislation and enacts special copyright protection for a religious entity in order to enhance its sway over the manner of religious worship, it has engaged in … an act of establishment." United Christian Scientists v. First Church of Christ, Scientists, 829 F.2d 1152 (D.C. Cir. 1987)

Legal Developments

Annual Display of a Nativity Violated the First Amendment

A federal appeals court ruled (by a 2-1 vote) that the annual display of a

Richard R. Hammar, Attorney, CPA

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State: Federal
Categories: First Amendment

A federal appeals court ruled (by a 2-1 vote) that the annual display of a nativity scene in Chicago's city hall violated the first amendment's nonestablishment of religion clause.

For 30 years the city of Chicago had displayed the scene, which consisted of twelve-inch figures, in the lobby of city hall. The display had been donated to the city, and no public funds were expended in maintaining or installing it. The display contained 6 disclaimer notices which recited that the display had been donated and that it was in no way sponsored or endorsed by the city government.

The American Jewish Congress challenged the display on the ground that it constituted the establishment of religion. In agreeing that the display violated the nonestablishment of religion clause, the court distinguished a 1984 Supreme Court ruling upholding the validity of a nativity scene in Pawtucket, Rhode Island. Unlike the Chicago display, the Pawtucket display was "only one element in a larger display that consisted in large part of secularized symbols and decorations" (e.g., a Santa Claus, reindeer, Christmas trees, lights).

The Chicago display was not a part of a larger, secularized display. Further, the Pawtucket display, while sponsored by the city government, was situated in a park owned by a private nonprofit organization. The Chicago display was situated in "the official headquarters building of the municipal government." Under these circumstances, the Chicago nativity scene impermissibly "advanced religion by sending a message to the people of Chicago that the city approved of Christianity." American Jewish Congress v. City of Chicago, 827 F.2d 120 (7th Cir. 1987)

Legal Developments

Court Struck Down Provisions that Permitted Religious Organizations to Use Federal Funds

A federal district court struck down those provisions of the Adolescent Family Life Act that

Richard R. Hammar, Attorney, CPA

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State: Federal
Categories: First Amendment

A federal district court struck down those provisions of the Adolescent Family Life Act that permitted religious organizations to use federal funds for the counseling and teaching of adolescents on matters related to teenage pregnancy.

Such provisions had a legitimate secular purpose, concluded the court, but had a primary effect of advancing religion and accordingly violated the first amendment's nonestablishment of religion clause. Kendrick v. Bowen, 657 F. Supp. 1547 (D.D.C. 1987).