Archdiocese Faces Fraud Suit for Using Donations to Defend, Settle Sex Abuse Claim

The church tried—and failed—to have the case dismissed under the ecclesiastical abstention doctrine.

Summary : A Michigan appellate court ruled that the ecclesiastical abstention doctrine did not bar a lawsuit alleging a Catholic archdiocese committed fraud by redirecting donations raised for a specific ministry to instead be used to defend and settle a sex abuse claim.

Fraud suit rooted in call for donations

Several church members sued a Catholic archdiocese for fraud, claiming that it asked its parishioners to donate money to the Catholic Services Appeal (CSA) when in fact the donations were used for the defense and settlement of a sex abuse claim.

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The trial court ruled that the plaintiffs’ claims were barred by the ecclesiastical abstention doctrine, a judicially created legal doctrine based upon the First Amendment that bars civil courts from resolving disputes involving doctrine and polity.

WATCH: Church Law & Tax Editor and Attorney-at-Law Matt Branaugh explains why lawsuits like these are so important for church leaders involved in fundraising campaigns.

The plaintiffs appealed, arguing the ecclesiastical abstention doctrine is not applicable to the facts of this case because no questions of church doctrine or polity had to be examined to resolve their claims.

Allegations of fraud

The plaintiffs claimed the archdiocese committed fraud when it said CSA donations would be used for charitable ministries and were not and would not be used to settle claims “of any nature” against it. According to the plaintiffs, the archdiocese made a false representation because the CSA donations were used to investigate and respond to a sex abuse claim.

Did you know? A similar lawsuit, against the late Ravi Zacharias’ ministries, is moving through the courts in Georgia. In that case, donors claim the ministry’s use of designated offerings for unrelated purposes constitutes fraud.

The appellate court’s decision

The appellate court reversed the lower court’s decision, allowing the lawsuit to proceed.

The appellate court noted that the elements of fraud are:

(1) the defendant made a material representation; (2) the representation was false; (3) when the defendant made the representation, the defendant knew that it was false, or made it recklessly, without knowledge of its truth as a positive assertion; (4) the defendant made the representation with the intention that the plaintiff would act upon it; (5) the plaintiff acted in reliance upon it; and (6) the plaintiff suffered damage.

In weighing whether the ecclesiastical abstention doctrine prevented such a claim from proceeding against the archdiocese, the appellate court concluded:

… contrary to defendants’ arguments, resolution of … plaintiffs’ fraud claim would not impermissibly permit the trial court to second guess how the Archdiocese spends its money. (emphasis added) In order to adjudicate plaintiffs’ claim that the CSA donations were not and would not be used to settle claims against the Archdiocese, the trial court would only be required to decide whether the Archdiocese’s statement was true or false when made. Such an inquiry by the trial court would not involve delving into internal church policies or otherwise substituting its opinion in lieu of that of the authorized tribunals of the church in ecclesiastical matters. The inquiry would not relate to the propriety of how the donations were spent, but rather whether the Archdiocese lied about their purpose when it solicited them. This does not cross the line imposed by the First Amendment.

What this means for churches

A failure by a church to spend designated offerings for the donors’ designated purposes may subject a church to liability on the basis of fraud or misrepresentation.

In this case, the appellate court concluded that such a claim of fraud or misrepresentation could be subject to the civil courts’ jurisdiction without violating the archdiocese’s First Amendment rights.

Dux v. Bugarin, 2021 WL 6064359 (Mich. App. 2021).

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